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An appreciation of the US dollar would ____ (increase, decrease, not affect) aggregate demand, and an increase in the real interest rate would ____ (increase, decrease, not affect) aggregate demand.
Correct Answer: C
An appreciation of the dollar would make U.S. goods and services more expensive to foreigners and would reduce exports. An increase in the real interest rate would depress domestic investment spending and spending on consumer durables such as automobiles and refrigerators. Spending on U.S. exports, investment spending and consumer spending are components of aggregate demand.