Suppose the Dollar Depreciates in the Foreign Exchange Markets

question 87

Multiple Choice

Suppose the dollar depreciates in the foreign exchange markets.What is the impact on U.S.Real GDP?

• A)It must rise because dollar depreciation shifts the U.S.AD curve rightward.
• B)It must fall because dollar depreciation shifts the U.S.SRAS curve leftward.
• C)It remains constant since dollar depreciation does not shift either the U.S.AD curve or the U.S.SRAS curve.
• D)It may rise,fall,or remain constant depending upon whether the U.S.AD curve shifts rightward by more,less,or an amount equal to the leftward shift of the U.S.SRAS curve.

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Definitions:

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