Economic Definition of international-substitution effect. Defined.
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Term international-substitution effect Definition: A change in aggregate expenditures on real production, especially net exports through the foreign sector, that results because a change in the price level alters the relative prices of exports and imports. The international-substitution effect, also termed the net-export effect, is one of three effects underlying the negative slope of the aggregate demand curve associated with a movement along the aggregate demand curve and a change in aggregate expenditures. The other two are real-balance effect and interest-rate effect.