Assume That a Country Currently Has a Trade Deficit

question 125

Multiple Choice

Assume that a country currently has a trade deficit.If that country experiences a recession,what would we expect to happen to the trade deficit?

• A) Nothing,because recessions do not impact the trade deficit.
• B) Imports tend to be higher during this time,which increases the trade deficit.
• C) Exports tend to be lower during this time,which decreases the trade deficit.
• D) Exports tend to be higher during this time,which increases the trade deficit.
• E) Imports tend to be lower during this time,which decreases the trade deficit.

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Definitions:

Loanable Funds

Represents the money available for borrowing in the financial markets, determined by savings and the supply of credit.

Equilibrium Interest Rate

The interest rate at which the demand for money balances equals the supply of money in circulation, leading to a stable economic environment.

Loanable Funds

A term in economics referring to all the money available for lending by banks or other financial institutions, influenced by savings and investments.

Business Borrowing

The act of obtaining funds by businesses from external sources like banks or financial institutions to finance operations or investments.