Which of the Following Is True of Exports as a Component

question 23

Multiple Choice

Which of the following is true of exports as a component of aggregate demand?

• A) If exports are greater than imports, the economy has a trade deficit.
• B) Exports increase the economy's leakages and reduce the size of the multiplier.
• C) Exports are independent of the domestic economy's level of income.
• D) As income levels increase, an economy moves from a trade surplus to a trade deficit.

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Definitions:

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers, leading to a balance in the market.

Consumer Preference

The inclination of consumers toward certain products or services over others based on their characteristics, such as taste, quality, and price.

Equilibrium

An equilibrium in the market where demand matches supply, thereby stabilizing prices.

General Equilibrium

An economic condition where supply and demand are balanced across all markets in the economy, leading to an optimal distribution of resources.