In an open economy, as the price level decreases, a(n) _____ demand for domestic goods relative to foreign goods results in a(n) _____ in the quantity of real GDP demanded.
A)increase in the; decrease
B)increase in the; increase
C)decrease in the; decrease
D)decrease in the; increase
E)constant; decrease

Question

Quizplus · Accepted Answer

When the price level decreases in an open economy, domestic goods become relatively cheaper compared to foreign goods. This increases the demand for domestic goods and reduces the demand for foreign goods, leading to an increase in the demand for domestic goods relative to foreign goods. As a result, the quantity of real GDP demanded also increases.

In an Open Economy, as the Price Level Decreases, A(n)