Question

If the price level increases in the United States relative to foreign countries, then American consumers will purchase more foreign goods and fewer U.S. goods. This statement describes ____ (A) the output effect. (B) the real-balances effect. (C) the foreign purchases effect. (D) the shift-of-spending effect

Answer 1

Answer:

The correct answer is (C) the foreign purchases effect.

Explanation:

As a result of a negative situation for the internal economy, where the price of goods and services increases as a result of economic phenomena, people and companies tend to resort to the process of purchasing abroad, in order to meet their needs with A minimum amount of money.