Asked by Oreyonda Scott on Jun 23, 2024
Verified
Relatively rapid U.S. growth between 2002 and 2007 contributed to large U.S. trade deficits by
A) increasing U.S. national income, which decreased U.S. exports.
B) reducing real interest rates in the United States.
C) increasing U.S. tax revenues and reducing the federal budget deficit.
D) increasing U.S. national income, which increased U.S. imports.
Trade Deficits
A situation where a country's imports exceed its exports over a certain period, leading to more money leaving the economy than entering it.
National Income
National Income is the total value of all goods and services produced by a country's economy over a specific period, often used to gauge economic performance.
Real Interest Rates
The rate of interest an investor expects to receive after allowing for inflation, reflecting the true cost of capital.
- Understand the influence of capital flows and financial regulations on currency valuations in both flexible and pegged exchange rate regimes.
- Analyze the effects of trade imbalances, including both deficits and surpluses, on the economic health of a country.
- Comprehend the causes and consequences of significant trade deficits, particularly within the framework of the United States and its trading allies.
Verified Answer
1G
18. Galuh Mafela Mutiara SujakJun 24, 2024
Final Answer :
D
Explanation :
Rapid U.S. growth typically increases national income, which boosts consumer and business spending, including on imported goods, thus widening the trade deficit.
Learning Objectives
- Understand the influence of capital flows and financial regulations on currency valuations in both flexible and pegged exchange rate regimes.
- Analyze the effects of trade imbalances, including both deficits and surpluses, on the economic health of a country.
- Comprehend the causes and consequences of significant trade deficits, particularly within the framework of the United States and its trading allies.