Question

“The appreciation of the dollar from 2012 to 2017 had a negative effect on aggregate demand in the United States.” Is this statement true, false, or uncertain? Explain your answer.

Short answer

The statement is true.

Step-by-step solution

Step 1. Define aggregate demand and aggregate supply.

The total quantity of demand for all finished products and services generated in an economy is measured as aggregate demand.

Aggregate supply, often known as total production, is the whole supply of goods and services produced within an economy in a given period at a specific overall price.

Step 2. Is the given statement is true or false.

The assertion is correct. An increase in the appreciation of the US dollar reduces net exports, and the aggregate demand curve changes downward and to the left, lowering output, according to the aggregate demand and supply analysis.

A appreciation in the value of the US dollar makes US exports less profitable in the worldwide market. Because exports are a component of aggregate demand, a drop in exports reduces overall demand.