When the Prices of a Country's Imports Decrease, the Prices

question 257

Multiple Choice

When the prices of a country's imports decrease, the prices of domestic goods may decrease. This occurs because

• A) a decrease in the prices of imported inputs will cause aggregate supply to decrease.
• B) if import prices fall relative to domestic prices, households will tend to substitute domestically produced goods and services for imports.
• C) if import prices fall relative to domestic prices, households will tend to substitute imports for domestically produced goods and services.
• D) a decrease in the prices of imported inputs will cause aggregate demand to increase.

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