The international trade effect is the:
A)inverse relationship between prices and investment.
B)positive relationship between prices and investment.
C)inverse relationship between domestic prices and net exports.
D)positive relationship between domestic prices and net exports.

Question

Quizplus · Accepted Answer

The international trade effect refers to the inverse relationship between domestic prices and net exports. When domestic prices increase, exports become relatively more expensive, which decreases demand for exports and increases demand for imports, resulting in a decrease in net exports. Conversely, when domestic prices decrease, exports become relatively cheaper, which increases demand for exports and decreases demand for imports, resulting in an increase in net exports.

The International Trade Effect Is The