Question

If the U.S. price level falls compared to U.S. trading partners it means:     

1. More U.S. exports

2. More U.S. imports

3. More foreign exports

4. All of the above

Answer 1

Answer..... 1. ( More U.S. export)

Explanation:-

• A falling price level makes inputs prices to fall like of materials, labors etc, which in turn help in producing goods and services at cheap rates , encouraging US export.
• Other countries will import more form U.S. as goods and services are produced in the US becomes cheaper due to fall in the price level.
• As goods and services are now cheaply available in the US , it decreases US import, Now US people may prefer cheaper domestically produced than relatively costlier imports.
• Foreign exports to U.S. will decrease, as domestically produced goods are available at cheaper rates.