How does a rise in the foreign exchange rate affect aggregate ...

[Coya19@aol.com]

How does a rise in the foreign exchange rate affect aggregate demand in the United States? Explain your answer.
 
  What will be an ideal response?

Question 2

In the above figure, what is the minimum supply price for the fourth gallon of ice cream?
 
  A) 2.00
  B) 3.00
  C) 4.00
  D) 5.00

[connor417]

Answer to Question 1

An increase in the foreign exchange rate decreases U.S. aggregate demand. The foreign exchange rate is the amount of a foreign currency that a dollar can buy. If the exchange rate rises, a dollar buys more foreign currency. As a result, foreign goods and services become cheaper to U.S. citizens because U.S. citizens need to spend fewer dollars to buy foreign-produced goods and services. Simultaneously, U.S.-produced goods and services become more expensive to foreigners because they must spend more of their currency in order to buy the dollars necessary to buy the U.S.-produced goods and services. As a result, U.S. imports increase and U.S. exports decrease, both of which decrease U.S. aggregate demand.

Answer to Question 2

D

[Coya19@aol.com]

TYSM

[Dominic]

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