Trade Effect

Trade Effect - cheaper than domestic products. Again...

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Trade Effect: Rising level of prices finally causes fall in the aggregate demand via foreign trade effect. Under the conditions of inflation domestic prices of goods are higher than international price levels. This makes import of goods attractive since import prices are lower and goods are
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Unformatted text preview: cheaper than domestic products. Again because of an inflationary rise in the prices of export goods, foreign demand for exported goods declines. Both these processes together reduce demand for domestically produced goods and services....
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This note was uploaded on 11/17/2011 for the course EC ec 201 taught by Professor - during the Fall '10 term at Montgomery.

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