In a small, open economy, if net exports are negative, then:
A)domestic spending is greater than output.
B)saving is greater than investment.
C)net capital outflows are negative.
D)imports are less than exports.

Question

Quizplus · Accepted Answer

If net exports are negative, it means that the value of imports is greater than the value of exports. This results in a reduction in the output of the domestic economy, as production must be lowered to meet the demand for imports. Therefore, domestic spending is greater than output, which is the only option provided in the answer choices.

In a Small, Open Economy, If Net Exports Are Negative