In a small, open economy if net exports are negative, then:
A) domestic spending is greater than output.
B) saving is greater than investment.
C) net capital outflows are positive.
D) imports are less than exports.

Question

Quizplus · Accepted Answer

When net exports are negative, it means that a country is importing more than it is exporting. This situation implies that domestic spending (on consumption, investment, and government purchases) exceeds the output of the economy, because the excess demand is being met through imports.

In a Small, Open Economy If Net Exports Are Negative