Final answer:
If the U.S. dollar depreciates, the aggregate demand curve would shift to the right due to cheaper exports and more expensive imports, increasing real GDP and price level, whereas the aggregate supply curve might shift to the left.
Step-by-step explanation:
If the U.S. dollar were to depreciate, other things being equal, the correct answer would be that the aggregate demand curve would shift to the right. This is because a lower U.S. dollar value would make U.S. exports cheaper to foreign buyers and imports more expensive to domestic consumers, thereby stimulating the components of aggregate demand—consumption (C), investment (I), government spending (G), and net exports (X-M). However, it also means higher prices for imported inputs, which could shift the short-term aggregate supply (AS) curve to the left due to increased costs of production for domestic companies. This shift in AS could potentially lead to higher inflation and, if the Federal Reserve tightens monetary policy in response, could also result in a recession. Nonetheless, a shift in the aggregate demand curve to the right typically results in a higher real GDP and an increase in the price level.