Holding other things constant, decreases in the price level in the US will a. Cause the dollar to appreciate b. Cause the dollar to depreciate c. Cause no change in dollar value d. None of the above

a. Cause the dollar to appreciate

Explanation:

A decrease in price levels is known as DEFLATION and deflation increases the value of the domestic currency in the short run.

Look at it this way, if you were able to buy more things with the same amount of money, wouldn't that mean that the strength of that currency has increased?

That's the basic concept here, holding other things constant, if prices drop in the US, the value of the Dollar RISES.

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