A rise in domestic prices relative to foreign prices,other things being equal,causes the net export (NX)function to shift ________ and ________.
A)upward; become flatter
B)upward; become steeper
C)downward; become flatter
D)downward; keep the same slope
E)downward; become steeper

Question

Quizplus · Accepted Answer

A rise in domestic prices relative to foreign prices causes exports to become less competitive in foreign markets, leading to a decrease in NX. This causes the NX function to shift downward. Additionally, the slope of the NX function becomes steeper, as a given change in relative prices now has a larger impact on the quantity of net exports.

A Rise in Domestic Prices Relative to Foreign Prices,other Things