The international trade effect states that a(n)________ in the price level will ________ net exports.
A)increase; increase
B)increase; decrease
C)decrease; decrease
D)decrease; not affect

Question

Quizplus · Accepted Answer

According to the international trade effect, an increase in the price level in a country will lead to an increase in the domestic price level relative to foreign prices. This will make domestically produced goods more expensive, resulting in a decrease in exports and an increase in imports, which will decrease net exports. Therefore, an increase in the price level will decrease net exports.

The International Trade Effect States That A(n)________ in the Price