What effect will an increase in the Canadian price level have on trade?
A)It will increase the volume of both Canadian exports and imports.
B)It will decrease the volume of both Canadian exports and imports.
C)It will increase the volume of Canadian exports but decrease the volume of imports.
D)It will decrease the volume of Canadian exports but increase the volume of imports.

Question

Quizplus · Accepted Answer

An increase in the Canadian price level would make Canadian goods relatively more expensive compared to foreign goods, which would decrease the demand for Canadian exports. At the same time, it would make foreign goods relatively cheaper, which would increase the demand for imports. Therefore, the volume of Canadian exports would decrease, while the volume of imports would increase.

What Effect Will an Increase in the Canadian Price Level