Question

The foreign purchases effect suggests that an increase in the u. S. Price level relative to other countries will.

Answer 1

The foreign purchases effect suggests that an increase in the u. S. Price level relative to other countries will reduce the export of US goods.

What is the foriegn purchases effect?

The foreign purchases effect studies how a change in the price levels of a country affects the export of the country's goods and services to other countries.

If the price level in one country increases, the country's goods become more expensive to other countries. As a result, the export of the good would decline.

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