If the price level in the United States decreases relative to prices in foreign countries, then
A) imports and exports of the United States will increase.
B) imports and exports of the United States will decrease.
C) imports of the United States will decrease and exports of the United States will increase.
D) imports of the United States will increase and exports of the United States will decrease.

Question

Quizplus · Accepted Answer

If the price level in the United States decreases relative to prices in foreign countries, it means the US dollar has appreciated. This will make imports cheaper and exports more expensive, leading to a decrease in imports and an increase in exports. Therefore, imports of the United States will decrease and exports of the United States will increase.

If the Price Level in the United States Decreases Relative