Why Do Booms and Recessions Tend to Be Transmitted Across

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Examlex · Accepted Answer

The Answer is The GDPs of the major economies are linked by trade.A boom in one country tends to raise its imports and hence push up exports and GDP in other countries.Similarly, a recession in one country tends to pull down GDP in other countries.Suppose a boom abroad raises GDPs in foreign countries.With rising incomes, foreigners will buy more American goods, which means that U.S.exports will increase.But an increase in our exports will, via the multiplier, raise GDP in the United States.By this mechanism, rapid economic growth abroad contributes to rapid economic growth here.The same mechanism also operates in reverse.

Why Do Booms and Recessions Tend to Be Transmitted Across

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