If U.S. prices increase relative to the rest of the world, we would expect:
A) imports to increase and net exports to increase.
B) exports to decrease and net exports to decrease.
C) imports to increase and net exports to increase
D) exports to decrease and net exports to increase.

Question

Quizplus · Accepted Answer

If U.S. prices increase relative to the rest of the world, U.S. goods become more expensive for foreign buyers, leading to a decrease in exports. Simultaneously, foreign goods become relatively cheaper for U.S. consumers, leading to an increase in imports. This results in a decrease in net exports.

If US Prices Increase Relative to the Rest of the World