Suppose the Canadian price level rises relative to price levels in other countries.How would Canada's consumption and exports be affected?
A) Consumption and net exports would decline.
B) Consumption and net exports would increase.
C) Consumption would increase and net exports would decrease.
D) Consumption would decrease and net exports would increase.

Question

Suppose the Canadian price level rises relative to price levels in other countries.How would Canada's consumption and exports be affected?  
A) Consumption and net exports would decline. 
B) Consumption and net exports would increase. 
C) Consumption would increase and net exports would decrease. 
D) Consumption would decrease and net exports would increase.

Quizplus · Accepted Answer

When the Canadian price level rises relative to other countries, Canadian goods become more expensive for both Canadians and foreigners. This leads to a decrease in consumption as Canadians find foreign goods more attractive price-wise, and a decrease in net exports as foreign buyers reduce their purchases of the now more expensive Canadian goods.

Suppose the Canadian Price Level Rises Relative to Price Levels