If Californians increase their purchases of Italian wine,assuming all else remains constant,this will ________ of the United States.
A)decrease the balance of trade
B)increase net exports
C)increase the current account balance
D)decrease the trade deficit
E)decrease the balance of payments

Question

Quizplus · Accepted Answer

When Californians increase their purchases of Italian wine, it means the US is importing more from Italy. This increases the trade deficit (imports are greater than exports), which decreases the balance of trade. Net exports decrease because the value of goods exported from the US is reduced relative to the value of goods imported. This does not directly increase the current account balance or the balance of payments; instead, it negatively impacts the balance of trade, contributing to a larger trade deficit.

If Californians Increase Their Purchases of Italian Wine,assuming All Else