According to the international trade effect, holding everything else unchanged,
A)an increase in net exports shifts the aggregate demand curve to the right.
B)an increase in the domestic price level reduces net exports leading to a movement along the aggregate demand curve.
C)an increase in the exchange rate shifts the aggregate demand curve to the right.
D)an increase in the prices of foreign goods level reduces imports leading to a movement along the domestic economy's aggregate demand curve.

Question

Quizplus · Accepted Answer

An increase in the domestic price level makes domestic goods more expensive relative to foreign goods, reducing net exports and causing a movement along the aggregate demand curve, not a shift.

According to the International Trade Effect, Holding Everything Else Unchanged