Suppose a U.S. resident buys a car from a car maker in Japan. This transaction will:
A) have a negative effect on Japan's balance of trade in merchandise.
B) have a negative effect on the U.S. balance of trade in merchandise.
C) have a positive effect on the U.S. balance of trade in merchandise.
D) bring money into the United States.
E) have no effect on Japan's balance of trade in merchandise.

Question

Quizplus · Accepted Answer

When a U.S. resident buys a car from a car maker in Japan, it means that the U.S. is importing a good from Japan. This will lead to an increase in imports and hence, have a negative effect on the U.S. balance of trade in merchandise.