Which of the following is incorrect?
A) As the U.S. price level rises, U.S. goods become relatively more expensive so that U.S. exports fall and
U.S. imports rise.
B) As the price level falls, the demand for money declines, the interest rate declines, and interest-rate
sensitive spending increases.
C) When the price level increases, real balances increase, businesses and households find themselves
wealthier and therefore increase their spending.
D) Given aggregate demand, an increase in aggregate supply increases real output and, assuming
downward flexible prices, reduces the price level.