Which of the following statements is the most accurate description of the open economy effect?
A)It is the ability to easily enter a marketplace if there is the potential for profit or exit from it if the business is not successful.
B)People are allowed to trade with anyone, anywhere, anytime.
C)If prices of the goods and services in the domestic market rise relative to those in global markets due to a higher domestic price level, consumers and businesses will buy more from foreign producers and less from domestic producers, other things being equal.
D)If prices of the goods and services in the domestic market rise relative to those in global markets due to a higher domestic price level, consumers and businesses will buy less from foreign producers and more from domestic producers.

Question

Quizplus · Accepted Answer

The open economy effect refers to the impact of changes in domestic prices on international trade. Option C accurately describes this relationship, as an increase in domestic prices relative to global prices will make imports cheaper and exports more expensive, leading to an increase in imports and a decrease in exports. Options A and B are not related to the open economy effect, while option D describes the opposite of the actual effect.

Which of the Following Statements Is the Most Accurate Description