When income levels in the home nation increase, what is the effect on the home TB?
A) It decreases because of expenditure switching.
B) It decreases because of an increase in imports.
C) It increases because of an increase in exports.
D) It increases because of expenditure switching.

Question

Quizplus · Accepted Answer

When income levels in the home nation increase, consumers typically have more disposable income, which often leads to an increase in consumption, including that of imported goods. This increase in imports, without a corresponding increase in exports, can lead to a decrease in the trade balance (TB).

When Income Levels in the Home Nation Increase, What Is