In a two-country world,a decrease in foreign input prices,ceteris paribus,
A) shifts the SRAS curve leftward,causing the price level to increase.
B) shifts the SRAS curve leftward,causing the price level to decrease.
C) shifts the SRAS curve rightward,causing the price level to increase.
D) shifts the SRAS curve rightward,causing the price level to decrease.
E) does not affect the SRAS curve or the price level.

Question

Quizplus · Accepted Answer

A decrease in foreign input prices would lower the production costs for firms in both countries, leading to an increase in supply. This would shift the SRAS curve for both countries rightward. As a result, the equilibrium price level would decrease, ceteris paribus.

In a Two-Country World,a Decrease in Foreign Input Prices,ceteris Paribus