Which of the following statements best describes the relationship between exchange rates and aggregate demand for U.S. output?
A. The exchange rate has no effect on aggregate demand.
B. A high exchange rate for the dollar tends to increase aggregate demand, and a low rate tends to reduce it.
C. Aggregate demand for U.S. output increases as the exchange rate increases.
D. A high exchange rate for the dollar tends to reduce aggregate demand, and a low rate tends to increase it.
Answer: D
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