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Current Account and Trade Balance
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If the increase in disposable income leads to higher imports, then an increase in exports due to foreign economic growth can be compared to: Higher real income in the U.S. : Increased imports from the EU :: Increased economic growth in the EU : ?

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Choose the Best Answer

A

Increased imports from the U.S.

B

Decreased imports from the U.S.

C

No change in trade balance

D

Increased tariffs on imports

Understanding the Answer

Let's break down why this is correct

Answer

If higher real income in the U. S. leads to increased imports from the EU, then increased economic growth in the EU can be compared to higher exports from the U. S. to the EU.

Detailed Explanation

When the EU grows economically, they buy more from the U.S. Other options are incorrect because Some might think that if the EU grows, they would buy less from the U.S; It's a common mistake to think growth doesn't affect trade.

Key Concepts

Current Account
Trade Balance
Disposable Income
Topic

Current Account and Trade Balance

Difficulty

easy level question

Cognitive Level

understand

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