One Explanation for the Inverse Relationship Between the Price Level

Multiple Choice

One explanation for the inverse relationship between the price level and output,as depicted by a downward-sloping AD curve,is that a fall in the domestic price level,other things including the exchange rate and the foreign price level remaining constant,makes domestic goods ___________ to foreign consumers and foreign goods more expensive to Canadians,which ___________ Canada's net exports.This is called the ___________ on spending.

A) more expensive;increases;foreign trade effect
B) cheaper;increases;real balance effect
C) cheaper;increases;foreign trade effect
D) cheaper;decreases;foreign trade effect
E) cheaper;decreases;real-balances effect