When the price level is low and the demand for domestic goods increases, how does it affect international trade?
A) Net exports will decrease.
B) Net exports will increase.
C) Prices of all international goods will decrease.
D) Prices of all international goods will increase.

Question

Quizplus · Accepted Answer

When the price level is low and the demand for domestic goods increases, it makes domestic goods relatively cheaper compared to international goods. This leads to an increase in net exports as foreign consumers tend to buy more domestic goods due to the lower price. Therefore, the correct answer is B, net exports will increase.

When the Price Level Is Low and the Demand for Domestic