AP Macroeconomics Question 380: Answer and Explanation

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Question: 380

3. U.S. real GDP most likely falls when

  • A. tariffs and quotas are removed.
  • B. investment in human capital is high.
  • C. the money supply is increased.
  • D. there is a trade surplus in goods and services.
  • E. the value of the dollar, relative to foreign currencies, is high.

Correct Answer: E


E-If the value of the dollar is high, it makes American goods more expensive to foreign consumers. This decreases net exports and lowers U.S. real GDP. All other choices likely increase real GDP.