If the U.S. price level decreased relative to price levels in foreign countries, what would be the impact on domestic aggregate supply and aggregate demand curves?
A) the aggregate supply curve would shift outward and the aggregate demand curve would remain unchanged
B) the aggregate supply curve would shift inward and the aggregate demand curve would remain unchanged
C) the aggregate demand curve would shift outward and the aggregate supply curve would remain unchanged
D) the aggregate demand curve would shift inward and the aggregate supply curve would remain unchanged
E) the domestic aggregate demand and supply curves would remain unchanged

Question

Quizplus · Accepted Answer

A decrease in the U.S. price level relative to foreign countries makes U.S. goods cheaper for foreign buyers, increasing exports and shifting the aggregate demand curve outward.

If the US Price Level Decreased Relative to Price Levels in Foreign