The relationship between the price level and net exports is:
A) negative.
B) positive.
C) perfectly correlated.
D) uncorrelated.

Question

Quizplus · Accepted Answer

According to the theory of purchasing power parity, as the price level of a country increases, its exports become relatively more expensive and its imports become relatively cheaper, leading to a decrease in net exports. Therefore, the relationship between the price level and net exports is negative.

The Relationship Between the Price Level and Net Exports Is