Question

Other things the same, as the price level decreases it induces greater spending on a. both net exports and investment. b. net exports but not investment. c. investment but not net exports. d. neither net exports nor investment.

Answer 1

Here the correct option is A) both net export and investment.

Step-by-step explanation:

When ever there is fall in the price level, it causes a fall in the price of domestic exports to other nations and on the other hand causing rise in price of foreign imports from other nations , so from this it results in the increase in exports and decrease in import of the nation, which leads to increase in net export ( which is export - import ). When there is decrease in price level, making investment would become cheaper and more investment could be made in the opportunities available.