Homework (Ch 20) \\'J 170 160 150 X J 140 + L\" I > "'" I | 130 L\" I 9 L: I y (1.120 .I._+ I I 110 I I AD I I I I 100 I I I I * 90 l l I l I l l . o 100 200 300 400 500 600 700 800 OUTPUT (Billions of dollars) As the price level falls, the cost of borrowing money will V , causing the quantity of output demanded to V . This phenomenon is known as the 7 effect. Additionally, as the price level falls, the impact on the domestic interest rate will cause the real value of the dollar to v in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore v , and the number of foreign products purchased by domestic consumers and rms (imports) will v , Net exports will therefore v I causing the quantity of domestic output demanded to V . This phenomenon is known as the v effect