when the value of the u s dollar falls foreign goods will become more expensive meanwhile goods manufactured in the u s will become cheaper for foreign markets aggregate demand will therefore increase when the value of the dollar increases foreign goods are cheaper and u s goods become more expensive to foreign markets and aggregate demand decreases 
economic conditions and aggregate demandeconomic conditions can impact aggregate demand whether those conditions originated domestically or internationally the financial crisis of 2007 08 sparked by massive amounts of mortgage loan defaults and the ensuing great recession offer a good example of a decline in aggregate demand due to economic conditions with businesses suffering from less access to capital and fewer sales they began to lay off workers and gdp growth contracted in 2008 and 2009 resulting in a total production contraction in the economy during that period a poor performing economy and rising unemployment led to a decline in personal consumption or consumer spending personal savings also surged as consumers held onto cash due to an uncertain future and instability in the banking system in 2020 the covid 19 pandemic caused reductions in both aggregate supply or production and aggregate demand or spending social distancing measures and concerns about the spread of the virus caused a significant decrease in consumer spending particularly in services as many businesses closed these dynamics lowered aggregate demand in the economy as aggregate demand fell businesses either laid off part of their workforces or otherwise slowed production as employees contracted covid 19 at high rates 2aggregate demand vs aggregate supplyin times of economic crises economists often debate as to whether aggregate demand slowed leading to lower growth or gdp contracted leading to less aggregate demand whether demand leads to growth or vice versa is economists version of the age old question of what came first the chicken or the egg boosting aggregate demand also boosts the size of the economy regarding measured gdp however this does not prove that an increase in aggregate demand creates economic growth since gdp and aggregate demand share the same calculation it only indicates that they increase concurrently the equation does not show which is the cause and which is the effect early economic theories hypothesized that production is the source of demand the 18th century french classical liberal economist jean baptiste say stated that consumption is limited to productive capacity and that social demands are essentially limitless a theory referred to as say s law of markets 3say s law the basis of supply side economics ruled until the 1930s and the advent of the theories of british economist john maynard keynes by arguing that demand drives supply keynes placed total demand in the driver s seat keynesian macroeconomists have since believed that stimulating aggregate demand will increase real future output and the total level of output in the economy is driven by the demand for goods and services and propelled by money spent on those goods and services keynes considered unemployment to be a byproduct of insufficient aggregate demand because wage levels would not adjust downward fast enough to compensate for reduced spending he believed the government could spend money and increase aggregate demand until idle economic resources including laborers were redeployed other schools of thought notably the austrian school and real business cycle theorists stress consumption is only possible after production this means an increase in output drives an increase in consumption not the other way around any attempt to increase spending rather than sustainable production only causes maldistribution of wealth or higher prices or both as a demand side economist keynes further argued that individuals could end up damaging production by limiting current expenditures by hoarding money for example other economists argue that hoarding can impact prices but does not necessarily change capital accumulation production or future output in other words the effect of an individual s saving money more capital available for business does not disappear on account of a lack of spending 