What Impact Does an Increase in the Price Level in the United

question 123

Multiple Choice

What impact does an increase in the price level in the United States have on net exports and why?

• A)An increase in the price level decreases net exports because higher prices decrease the value of the dollar.
• B)An increase in the price level decreases net exports by increasing the relative cost of American goods.
• C)An increase in the price level increases net exports because higher prices lower the value of the dollar.
• D)An increase in the price level increases net exports because higher prices decrease American spending on imports.

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Definitions:

Domestic Price

The price of goods or services within a country's borders, influenced by domestic demand and supply, excluding international factors.

Import Demand Curve

The import demand curve represents the relationship between the quantity of a good that a country imports and the price of that good.

Specialization

The practice of focusing effort and resources on a particular task or area of production to increase efficiency and output.

Increasing Opportunity Costs

The principle that the more a society tries to produce of a specific good, the higher the opportunity cost of further increasing its production.