A parallel downward shift in the net export (NX)function can be caused by
A)an increase in the Canadian- dollar price of foreign currency.
B)a decrease in domestic prices.
C)a decrease in foreign national income.
D)a decrease in foreign prices.
E)an increase in domestic national income.

Question

Quizplus · Accepted Answer

A decrease in foreign national income can cause a decrease in exports and therefore a downward shift in the net export function. Choice A is incorrect because an increase in the Canadian-dollar price of foreign currency would make exports more expensive and decrease them, causing a shift up in the net export function. Choice B is incorrect because a decrease in domestic prices would make exports cheaper and increase them, causing a shift up in the net export function. Choice D is incorrect because a decrease in foreign prices would make imports more expensive and decrease them, causing a shift up in the net export function. Choice E is incorrect because an increase in domestic national income could cause an increase in imports, which would shift the net export function down.

A Parallel Downward Shift in the Net Export (NX)function Can