Assuming a fixed exchange rate, a decrease in U.S.prices relative to European prices will:
A)decrease European exports to the United States.
B)increase U.S.imports from Europe.
C)decrease aggregate spending in the U.S.
D)not affect U.S.exports or imports.
E)raise the purchasing power of U.S.consumers.

Question

Quizplus · Accepted Answer

A decrease in U.S. prices relative to European prices makes U.S. goods cheaper for Europeans, leading to a decrease in European exports to the U.S. as Americans buy more domestic goods.

Assuming a Fixed Exchange Rate, a Decrease in U