A fall in domestic prices relative to foreign prices,other things being equal,causes the net export (NX)function to shift ________ and ________.
A)upward; become flatter
B)upward; become steeper
C)downward; become flatter
D)downward; keep the same slope
E)downward; become steeper

Question

Quizplus · Accepted Answer

A fall in domestic prices relative to foreign prices makes domestic goods cheaper relative to foreign goods, leading to an increase in net exports (NX). The NX function will shift upward. As the price difference between domestic and foreign goods increases, the slope of the NX function will become steeper, indicating a greater increase in net exports for a given change in the price differential.

A Fall in Domestic Prices Relative to Foreign Prices,other Things