As the U.S. price level rises relative to price levels in other countries, what would happen in the U.S.?
A) consumption and net exports would decline
B) consumption and net exports would increase
C) consumption would increase and net exports would decrease
D) consumption would decrease and net exports would increase
E) consumption and net exports would remain constant

Question

Quizplus · Accepted Answer

As the U.S. price level rises relative to price levels in other countries, U.S. goods become relatively more expensive. This makes U.S. exports less competitive and reduces net exports. Additionally, with higher prices domestically, U.S. consumers will purchase less, resulting in a decline in consumption. Therefore, both consumption and net exports would decrease.

As the US Price Level Rises Relative to Price Levels in Other