The idea that a change in the price level changes the relative price of domestic goods compared to foreign goods,and therefore changes the country's net exports,is called the

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The idea that a change in the price level changes the relative price of domestic goods compared to foreign goods, and therefore changes the country's net exports, is referred to as the foreign trade effect. A rising price level leads to a decrease in net exports, while a falling price level leads to an increase in net exports. The real-balances effect relates to changes in purchasing power due to changes in the price level, while the saving effect and the consumption effect relate to changes in spending patterns. The Fisher effect relates to changes in nominal interest rates due to changes in the expected inflation rate.

The Idea That a Change in the Price Level Changes