According to the net exports effect, as the price level falls relative to the rest of the world,
A) foreigners buy fewer goods.
B) foreigners buy more U.S. goods.
C) the aggregate demand curve shifts to the left.
D) the aggregate demand curve shifts to the right.

Question

Quizplus · Accepted Answer

When the price level falls relative to the rest of the world, U.S. goods become relatively cheaper and more attractive to foreign buyers. As a result, foreigners tend to buy more U.S. goods, which increases net exports and shifts the aggregate demand curve to the right.

According to the Net Exports Effect, as the Price Level