Which of the Following Best Illustrates the Concept of Derived

question 108

Multiple Choice

Which of the following best illustrates the concept of derived demand?

• A) The number of retail stores in a downtown area decreases even though demand for retail goods increases.
• B) An increase in the number of new, single-family homes results from a spike in the gross national product.
• C) A Chinese plastics company increases its output because of its customers' higher toy exports to the United States.
• D) A heat wave results in an increased demand for air conditioners.
• E) Honda reduces its car prices, which causes GM to do the same.

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Definitions:

Merchandise Trade Deficits

A situation where a country's imports of goods exceed its exports, leading to more money leaving the country than coming in from merchandise trade.

International Debt

The total amount of debt owed by a country to foreign creditors, which can include governments, private investors, and international banks.

Consumer Spending

The total amount of money spent by households in an economy on goods and services.

Appreciation

An increase in the value of a currency in terms of other currencies.