As the U.S. price level increases, other things equal, U.S. products become
A)more expensive abroad, which decreases U.S. exports
B)less expensive abroad, which increases U.S. exports
C)more expensive abroad, which has no effect on U.S. exports, since exports are assumed to be constant
D)less expensive abroad, which has no effect on U.S. exports, since exports are assumed to be constant
E)more expensive abroad, which increases U.S. exports

Question

Quizplus · Accepted Answer

As the U.S. price level increases, domestic goods and services become relatively more expensive compared to foreign goods and services. This makes U.S. exports more expensive abroad, which makes them less competitive and less likely to be purchased by foreign buyers. Therefore, U.S. exports decrease.

As the US Price Level Increases, Other Things Equal, U