Why Should the Recorded U.S.­Chinese Bilateral Trade

question 1

Multiple Choice

Why should the recorded U.S.­Chinese bilateral trade
Deficit in goods be interpreted with some caution?

• A)U.S.imports of Chinese products may be produced by U.S.subsidiaries that generate profits for the U.S.parent
• Firms (recorded as U.S.service export income).
• B)U.S.imports of Chinese products may utilize material inputs that China imports from the United States.
• C)U.S.imports of Chinese products may be produced with capital goods (e.g., machinery) that China imports from
• The United States.
• D)All of these are reasons for a cautious interpretation of the U.S.­Chinese bilateral trade balance.

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Definitions:

MC

MC, or Marginal Costs, refers to the cost associated with producing an additional unit of a good or service, highlighting the incremental expense of production expansion.

AC

Typically refers to Air Conditioning, a system used for cooling and sometimes heating depending on the air properties needed.

Total Costs

The aggregate amount of all costs associated with the production or offering of goods and services, including fixed and variable costs.

Output

The quantity of goods or services produced in a given time period.