Which of the following is true of the relationship between U.S. trade deficits and federal government budget deficits?
A) Increases in the budget deficit tend to be associated with increases in the trade deficit.
B) Increases in the budget deficit tend to be associated with reductions in the trade deficit.
C) Increases in the budget deficit are always associated with increases in the trade deficit.
D) Increases in the budget deficit are always associated with reductions in the trade deficit.

Question

Quizplus · Accepted Answer

Increases in the budget deficit tend to be associated with increases in the trade deficit. As the government increases its spending, it can lead to higher demand for foreign goods, which in turn can increase imports and lead to a larger trade deficit. This relationship is not always the case, as various other economic factors can also influence the trade deficit.

Which of the Following Is True of the Relationship Between