Considering only its direct effect on income, expansionary fiscal policy tends to:
A)be ambiguous with respect to the trade deficit.
B)increase a trade surplus.
C)decrease a trade deficit.
D)increase a trade deficit.

Question

Quizplus · Accepted Answer

Expansionary fiscal policy, by increasing domestic income, tends to increase imports relative to exports, thereby increasing a trade deficit.

Considering Only Its Direct Effect on Income, Expansionary Fiscal Policy