When the price level in Australia rises relative to the price level of other countries, ceteris paribus, ________ will rise, ________ will fall, and ________ will fall. a. net exports; imports; exports b. net exports; exports; imports c. exports; imports; net exports d. imports; exports; net exports
Question
When the price level in Australia rises relative to the price level of other countries, ceteris paribus, ________ will rise, ________ will fall, and ________ will fall.
a. net exports; imports; exports
b. net exports; exports; imports
c. exports; imports; net exports
d. imports; exports; net exports
Solution 1
The correct answer is d. imports; exports; net exports.
Here's why:
When the price level in Australia rises relative to other countries, it means that goods and services in Australia have become more expensive compared to those in other countries.
As a result, imports (goods and services bought from other countries) will rise because foreign goods are now relatively cheaper. On the other hand, exports (goods and services sold to other countries) will fall because Australian goods are now relatively more expensive.
Net exports (exports minus imports) will also fall. This is because the increase in imports and decrease in exports both contribute to a decrease in net exports.
So, when the price level in Australia rises relative to the price level of other countries, imports will rise, exports will fall, and net exports will fall.
Solution 2
Sure, please provide the text you want me to respond to.
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