When the U.S. price level decreases relative to the rest of the world:
A) exports and net exports will increase.
B) imports and net exports will increase.
C) exports will increase and net exports will decrease.
D) exports will decrease and net exports will increase.

Question

Quizplus · Accepted Answer

When the U.S. price level decreases relative to the rest of the world, exports become relatively cheaper for foreign buyers, so both exports and net exports will increase. This is because the demand for U.S. goods will rise due to their competitive pricing, resulting in an increase in exports, which in turn will increase net exports.