Exchange rate shocks shift the ____ curve to the ____.
A) AD, right
B) AD, left
C) SRAS, right
D) SRAS, left
E) none of the above

Question

Quizplus · Accepted Answer

An exchange rate shock affects the production costs of firms in the economy, thus shifting the short-run aggregate supply (SRAS) curve. An increase in exchange rate leads to higher import costs for firms, increasing their overall production costs. This shift results in a leftward shift of the SRAS curve.

Exchange Rate Shocks Shift the ____ Curve to the ____

Exchange Rate Shocks Shift the Curve to the