When the prices of a country's imports decrease, the prices of domestic goods may decrease. This occurs because
A. a decrease in the prices of imported inputs will cause aggregate demand to increase.
B. if import prices fall relative to domestic prices, households will tend to substitute domestically produced goods and services for imports.
C. if import prices fall relative to domestic prices, households will tend to substitute imports for domestically produced goods and services.
D. a decrease in the prices of imported inputs will cause aggregate supply to decrease.
Answer: C
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The U.S. government restricts the production of peanuts by limiting production licenses. By also prohibiting imports, the government maintains prices well above levels peanut farmers would obtain if supply were not restricted. This program has the same effect as a
A. price ceiling. B. price floor. C. opportunity cost. D. shortage. E. efficiency move.
The ultimate purpose of an economic model is to
a. explain reality as completely as possible b. establish assumptions that closely resemble reality c. help us understand economic behavior d. determine what each decision maker wants to maximize e. guide government policy decisions
Which of the following would shift the long-run aggregate supply curve to the right?
A. The elimination of job training programs. B. The elimination of government-subsidized college loans. C. A decrease in the marginal propensity to save. D. Political and economic stability.
The reservation wage is
A) the wage that an employer must pay workers to reduce turnover to a reasonable level. B) the wage that ensures a laid-off individual will wait for re-hire, rather than find another job. C) the lowest wage firms are allowed by law to pay workers. D) the wage offer that will end a labor-strike. E) none of the above