A Downward Shift and Steepening of the Net Export (NX)function

question 32

Multiple Choice

A downward shift and steepening of the net export (NX) function can be caused by

• A)an increase in domestic national income.
• B)a decrease in foreign national income.
• C)an increase in domestic prices relative to foreign prices.
• D)a decrease in the Canadian-dollar price of foreign currency.
• E)both C and D are correct.

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Definitions:

Absolute PPP

Absolute Purchasing Power Parity, an economic theory suggesting that goods in different countries should have the same price when expressed in a common currency.

Trade Barriers

Measures that governments or public authorities introduce to make imported goods or services less competitive than locally produced goods and services.

Exchange Rate

The price at which one currency can be exchanged for another.

Transaction Costs

Transaction costs are expenses incurred when buying or selling a good or service, which include fees, taxes, and other charges associated with the transaction.