The foreign trade effect suggests that a decrease in the Canadian price level relative to other countries will:
A)shift the aggregate demand curve leftward.
B)shift the aggregate supply curve leftward.
C)decrease Canadian exports and increase Canadian imports.
D)increase Canadian exports and decrease Canadian imports.

Question

Quizplus · Accepted Answer

The foreign trade effect suggests that a decrease in the Canadian price level relative to other countries will make Canadian goods relatively less expensive, leading to an increase in Canadian exports and a decrease in Canadian imports. Therefore, the correct answer is D.

The Foreign Trade Effect Suggests That a Decrease in the Canadian