Which of the following best describes how the international trade effect works?
A) The price level in the U.S.falls relative to foreign price levels,U.S.goods become relatively less expensive than foreign goods,and both Americans and foreigners buy more U.S.goods.
B) The price level in the U.S.falls relative to foreign price levels,U.S.goods become relatively more expensive than foreign goods,and both Americans and foreigners buy more U.S.goods.
C) The price level in the U.S.rises relative to foreign price levels,U.S.goods become relatively more expensive than foreign goods,and both Americans and foreigners buy fewer U.S.goods.
D) The price level in the U.S.rises relative to foreign price levels,U.S.goods become relatively more expensive than foreign goods,and both Americans and foreigners buy more U.S.goods.
E) a and c

Question

Quizplus · Accepted Answer

The international trade effect explains how a change in price levels affects international trade. When the price level in the U.S. falls relative to foreign price levels (A), U.S. goods become cheaper, increasing demand for U.S. exports. Conversely, when the U.S. price level rises relative to foreign price levels (C), U.S. goods become more expensive, reducing demand for U.S. exports. Both scenarios (A and C) correctly describe the international trade effect from different perspectives.

Which of the Following Best Describes How the International Trade