An increase in the U.S.price level,other things constant,will _____.
A)increase U.S.exports and decrease U.S.imports
B)increase U.S.exports and leave U.S.imports unchanged
C)decrease U.S.exports and increase U.S.imports
D)decrease U.S.exports and leave U.S.imports unchanged
E)leave both U.S.exports and U.S.imports unchanged

Question

Quizplus · Accepted Answer

An increase in the U.S. price level will lead to a decrease in U.S. exports because the goods and services produced in the U.S. become relatively more expensive compared to other countries. Hence, foreigners would demand fewer U.S. goods and services. Additionally, it will increase U.S. imports because foreign goods and services become relatively cheaper compared to the domestic goods and services, leading to higher demand for foreign goods and services.

An Increase in the U