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

question 169

Multiple Choice

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

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

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