Asked by Vickie Feazelle on May 04, 2024
Verified
As the economy recovers from a recession, economists expect its
A) imports to grow, and therefore its trade deficit would also grow.
B) exports to grow, and therefore its trade deficit would shrink.
C) imports and exports to grow at roughly the same rate, so its trade deficit will stay constant.
D) imports and exports to start declining. Therefore, its trade deficit will also decline a little bit.
Economy Recovers
The process by which an economy returns to a state of growth or improves in its indicators after a period of recession or decline.
Trade Deficit
Occurs when a country's imports exceed its exports during a given time period, indicating an outflow of domestic currency to foreign markets.
Imports and Exports
Economic transactions involving the buying of goods and services from foreign countries (imports) and selling domestically produced goods and services to foreign countries (exports).
- Examine the interrelation among exchange rates, trade balance, and economic development.
Verified Answer
TM
Tobias MancisidorMay 07, 2024
Final Answer :
A
Explanation :
As an economy recovers from a recession, its demand for goods and services typically increases. This leads to an increase in imports because consumers and businesses are buying more, including products from abroad. If imports grow faster than exports, the trade deficit (the amount by which the cost of a country's imports exceeds the value of its exports) would indeed grow.
Learning Objectives
- Examine the interrelation among exchange rates, trade balance, and economic development.