An economic expansion in the U.S. ______ the demand for exports from Mexico resulting in an increase in Mexican autonomous expenditures and a(n) ______ output gap in Mexico.
A) reduces; expansionary
B) increases; expansionary
C) reduces; recessionary
D) increases; recessionary

Question

Quizplus · Accepted Answer

An economic expansion in the U.S. would increase the demand for exports from Mexico as the U.S. is one of Mexico's largest trading partners. This increase in demand would result in an increase in Mexican autonomous expenditures, meaning that Mexico's economy is expanding as well. Therefore, the output gap in Mexico would be expansionary.

An Economic Expansion in the U