A change in both the domestic price level and the foreign price level will translate into a parallel shift of the domestic aggregate demand curve.

Question

Quizplus · Accepted Answer

A change in the domestic price level will cause a movement along the aggregate demand curve, while a change in the foreign price level will affect net exports and cause a shift of the aggregate demand curve. Therefore, a change in both price levels will result in a shift, not a parallel movement.

A Change in Both the Domestic Price Level and the Foreign