An increase in the U.S.price level,other things constant,would
A)increase U.S.exports and decrease U.S.imports
B)increase U.S.exports and leave U.S.imports unchanged
C)decrease U.S.exports and increase U.S.imports
D)decrease U.S.exports and leave U.S.imports unchanged
E)leave both U.S.exports and U.S.imports unchanged

Question

Quizplus · Accepted Answer

An increase in the U.S. price level would decrease the competitiveness of U.S. exports, making them relatively more expensive compared to foreign goods. This would reduce demand for U.S. exports and decrease exports. On the other hand, imports would become relatively cheaper, increasing demand for foreign goods and increasing imports. Therefore, an increase in the U.S. price level would decrease U.S. exports and increase U.S. imports, as stated in choice C.

An Increase in the U.S.price Level,other Things Constant,would