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 Australian goods.
C)the aggregate demand curve shifts to the left.
D)the aggregate demand curve shifts to the right.
E)the supply of Australian-made goods increases.

Question

Quizplus · Accepted Answer

When the price level falls relative to the rest of the world, Australian goods become relatively cheaper and more attractive to foreign buyers. This leads to an increase in net exports, which is the difference between exports and imports. An increase in net exports leads to an increase in aggregate demand, which shifts the AD curve to the right. Therefore, foreigners would buy more Australian goods.

According to the Net-Exports Effect,as the Price Level Falls Relative