If the Canadian dollar decreases in value relative to other currencies, how does this affect the aggregate demand curve?
A)This will move the economy up along a stationary aggregate demand curve.
B)This will move the economy down along a stationary aggregate demand curve.
C)This will shift the aggregate demand curve to the left.
D)This will shift the aggregate demand curve to the right.
E)This will not affect the Canadian economy.

Question

Quizplus · Accepted Answer

A decrease in the Canadian dollar's value relative to other currencies will make exports cheaper and imports more expensive, leading to a net increase in exports and thus increasing aggregate demand. This shift in demand will cause the aggregate demand curve to shift to the right.

If the Canadian Dollar Decreases in Value Relative to Other