When the price level in France increases while the exchange rate and the price level in the United States remain the same, the result is
A) U.S.-made goods become relatively cheaper compared to French-made goods.
B) French citizens are more likely to buy U.S.-made goods.
C) U.S. citizens are less likely to buy French-made goods.
D) All of the above answers are correct.

Question

Quizplus · Accepted Answer

When the price level in France increases, French-made goods become relatively more expensive compared to U.S.-made goods, causing U.S.-made goods to become relatively cheaper. Consequently, French citizens will be more likely to buy U.S.-made goods, while U.S. citizens are less likely to buy French-made goods. Therefore, all of the above answers are correct.

When the Price Level in France Increases While the Exchange