Asked by Daisy Farhm on Jul 09, 2024
Verified
The foreign purchases effect suggests that a decrease in the American price level relative to those in other countries will
A) shift the aggregate demand curve leftward.
B) shift the aggregate supply curve leftward.
C) decrease American exports and increase American imports.
D) increase American exports and decrease American imports.
Foreign Purchases Effect
The phenomenon where changes in domestic prices can influence the demand for foreign and domestically produced goods.
American Price Level
The average of current prices across the entire spectrum of goods and services produced in the United States.
Aggregate Demand
The cumulative request for goods and services in an economy, gauged at a singular comprehensive price level during a designated time span.
- Pinpoint the determinants that affect aggregate demand and supply dynamics, encompassing governmental outlays, confidence among consumers, and foreign buying activities.
Verified Answer
SQ
Sameer QaraeenJul 10, 2024
Final Answer :
D
Explanation :
The foreign purchases effect suggests that a decrease in the price level in the US relative to other countries will increase exports and decrease imports. This is because US goods become relatively cheaper compared to goods in other countries, leading to an increase in demand for US goods from foreign countries and a decrease in domestic demand for foreign goods. Therefore, the correct choice is D, which states that a decrease in the American price level relative to those in other countries will increase American exports and decrease American imports.
Learning Objectives
- Pinpoint the determinants that affect aggregate demand and supply dynamics, encompassing governmental outlays, confidence among consumers, and foreign buying activities.