Asked by Brandt Cortina on Jul 15, 2024
Verified
Identify the correct statement about net exports.
A) The value of net exports increases as real domestic income increases.
B) The value of net exports increases as real domestic income decreases.
C) The value of net exports is dependent on the amount of government purchases.
D) The value of net exports is always positive.
E) The value of net exports is always negative.
Net Exports
The difference between a country's total value of exports and total value of imports.
Real Domestic Income
The total income of a country's residents and businesses adjusted for inflation, reflecting the real purchasing power.
- Evaluate the consequences of changing income levels on imports and exports.
Verified Answer
KW
Kayla WilliamsJul 21, 2024
Final Answer :
B
Explanation :
Net exports refer to the value of a country's total exports minus its total imports. As real domestic income decreases, people tend to spend less on imports which in turn reduces the value of total imports. This leads to an increase in the value of net exports. Therefore, the correct statement is that the value of net exports increases as real domestic income decreases (option B). Options A, C, D, and E are incorrect.
Learning Objectives
- Evaluate the consequences of changing income levels on imports and exports.