A change in which of the following variables will have no direct effect on the level of domestic demand?

Question

Quizplus · Accepted Answer

The real exchange rate (the relative price of domestic versus foreign goods) affects the competitiveness of domestic goods in foreign markets, and thus affects export demand, but it does not have a direct effect on domestic demand. The other variables listed (domestic income, government spending, and interest rates) can all affect the amount of goods and services that domestic consumers purchase.

A Change in Which of the Following Variables Will Have