when the level of income _________ there will be a tendency for the trade balance to improve as imports?
Correct answer: C. falls, fall
- A. increase, increase
- B. falls, increase
- C. falls, fall
- D. increase, fall
Explanation
When income falls, households generally buy fewer imports, so import spending falls and the trade balance tends to improve. This assumes exports are unchanged and imports respond normally to income.
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About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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