The international substitution effect of a change in the price level results from a

Question

Quizplus · Accepted Answer

The international substitution effect refers to the tendency of consumers to substitute foreign goods for domestic goods (or vice versa) when the relative prices of those goods change. Therefore, a change in the price of foreign goods relative to domestic goods is the key factor behind the international substitution effect. Answer B refers to the intertemporal substitution effect, which is the tendency of consumers to shift their consumption between current and future periods in response to changes in relative prices. Answer C refers to the wealth effect, which is the tendency of changes in the price level to alter the purchasing power of consumers' wealth. While these effects may also influence consumers' decisions, they do not directly relate to the international substitution effect.

The International Substitution Effect of a Change in the Price