The balance of trade can only worsen if income ________ relative to absorption.
A)increases
B)decreases
C)does not change
D)None of the above

Question

Quizplus · Accepted Answer

If income decreases relative to absorption, it means that the country's spending is exceeding its income. As a result, imports will increase as the country needs more goods and services to meet its demand. On the other hand, exports may decrease if there is a fall in the production of goods and services which leads to a decline in the country's competitiveness in the global market. This will lead to a worsening of the balance of trade.

The Balance of Trade Can Only Worsen If Income ________