After a significant increase in real income in the United States, policymakers are concerned about the rising trade deficit. Which of the following scenarios best illustrates the implications of this increase on the current account balance with the European Union?

When real income in the United States increases significantly, people have more money to spend. This often leads to a higher demand for imported goods, including products from the European Union. As Americans buy more European goods, the United States imports more than it exports to Europe, which can worsen the trade deficit. For example, if many Americans start purchasing luxury cars from Germany, the money spent on these imports will contribute to a larger trade deficit with the EU. Consequently, this situation can negatively impact the current account balance, indicating that the U.