Final answer:
Rising national incomes abroad tend to increase US exports as foreign consumers can afford more American goods. However, if US prices rise or the US dollar strengthens, exports may decrease as American products become more expensive relative to international goods.
Step-by-step explanation:
When national incomes abroad are rising, the income effect indicates that the populations of these nations will have greater purchasing power. This generally leads to an increase in consumption of both domestic and foreign goods and services, thereby potentially increasing US exports as foreign consumers can afford more American products. Conversely, if national incomes decline, US exports may decrease as purchasing power contracts and demand for foreign products diminishes.
The foreign price effect highlights that if prices in the US rise while remaining constant in other countries, American goods become relatively more expensive on the international market, leading to a decrease in US exports. If the US dollar weakens compared to other currencies, it often results in an increase in US exports because American goods become less expensive for foreign buyers.