The international trade effect states that
A)an increase in the price level will raise net exports.
B)an increase in the price level will lower net exports.
C)an increase in the price level will raise exports.
D)an increase in the price level will lower imports.
E)an increase in the price level will rise domestic GDP.

Question

Quizplus · Accepted Answer

The international trade effect states that an increase in the price level will lower net exports. This is due to the fact that, as prices rise, domestic goods become relatively more expensive compared to goods produced in other countries. As a result, consumers are likely to buy more imported goods and less domestic goods, leading to lower net exports.

The International Trade Effect States That