An increase in the U.S. price level will:
A)increase U.S.exports.
B)increase U.S.imports.
C)increase the quantity of RGDP demanded in the United States.
D)both (a) and (c)

Question

An increase in the U.S. price level will:
A)​increase U.S.exports.
B)​increase U.S.imports.
C)​increase the quantity of RGDP demanded in the United States.
D)​both (a) and (c)

Quizplus · Accepted Answer

An increase in the U.S. price level will increase the costs of U.S. goods and services, which will make them relatively more expensive compared to foreign goods and services. This will lead to an increase in U.S. imports, as consumers and businesses shift their demand towards cheaper foreign alternatives. An increase in U.S. exports (choice A) is less likely as it makes U.S. goods and services relatively more expensive in foreign markets, reducing their competitiveness. An increase in RGDP demanded in the United States (choice C) is also possible, but not as certain as an increase in imports because it depends on various other factors such as consumer and business spending, government policies, and international trade. D is unlikely because A and C are not both true.

An Increase in the U.S. Price Level Will