The international trade effect states that
A)an increase in the price level will raise net exports.
B)an increase in the price level will lower net exports.
C)an increase in the price level will raise exports.
D)an increase in the price level will lower imports.

Question

Quizplus · Accepted Answer

The international trade effect states that as the price level in a country increases, the country's exports become relatively more expensive and its imports become relatively cheaper. This leads to a decrease in net exports, as exports decrease and imports increase, resulting in a lower demand for domestic goods and services.

The International Trade Effect States That