According to the International Effect Explanation of the Downward Slope

question 146

Multiple Choice

According to the international effect explanation of the downward slope of the AD curve, a lower price level in the U.S. economy causes:

• A) U.S. imports and U.S. exports to decrease.
• B) U.S. imports and U.S. exports to increase.
• C) U.S. imports to increase and U.S. exports to decrease.
• D) U.S. imports to decrease and U.S. exports to increase.

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Definitions:

Liquidity

The measure of how easily assets can be converted into cash without significant loss in value.

Balance Sheet

An accounting report that outlines a firm's assets, obligations, and owners' equity on a specific date.

Leverage Ratio

A financial metric indicating the level of debt relative to equity in a company's capital structure, used to assess the risk of investing in the company.

Acid-test Ratio

A financial metric used to evaluate a company's short-term liquidity, calculated by dividing liquid assets by current liabilities.