When the price level in Australia rises relative to the price level of other countries, ceteris paribus, ________ will rise, ________ will fall, and ________ will fall.
A)imports; exports; net exports
B)exports; imports; net exports
C)net exports; exports; imports
D)net exports; imports; exports

Question

Quizplus · Accepted Answer

When the price level in Australia rises relative to other countries, Australian goods become more expensive to foreigners, reducing exports. Conversely, foreign goods become relatively cheaper to Australians, increasing imports. As a result, net exports (exports minus imports) will fall.

When the Price Level in Australia Rises Relative to the Price