When trade deficits generate a decrease in aggregate income,__________________________________ .

Question

Quizplus · Accepted Answer

When trade deficits generate a decrease in aggregate income, it means that the country is spending more on imports than it is earning through exports. This results in a decrease in factors such as consumption, savings, investment, and tax revenue as the country tries to compensate for the loss. This is why choice A is the correct answer. Option B is incorrect because a trade deficit usually leads to a weakening of the currency, not strengthening. Option C is also incorrect because a decrease in aggregate income is usually negative for an economy. Option D is not directly related to the question and is therefore incorrect.

When Trade Deficits Generate a Decrease in Aggregate Income,__________________________________