When the U.S. price level falls, the open economy effect indicates that
A) U.S. imports will rise.
B) U.S. residents will move away from domestic goods and buy more foreign goods.
C) U.S. exports will increase.
D) foreigners will buy fewer U.S. goods.

Question

Quizplus · Accepted Answer

When the U.S. price level falls, U.S. goods become cheaper relative to foreign goods, causing U.S. exports to become more desirable to foreigners. This will result in an increase in U.S. exports.