Net exports is defined as exports minus imports. Because of this minus sign, net
ID: 1201089 • Letter: N
Question
Net exports is defined as exports minus imports. Because of this minus sign, net exports can be negative or positive, depending on the sizes of exports and imports. If exports are greater than imports, then net exports are positive, resulting in a “trade surplus.” On the other hand, if imports are greater than exports, then net exports are negative, resulting in a “trade deficit.” Using this information, Situation (2) has a _____, meaning that U.S. GDP for Situation (2) is _____ $18 trillion.
trade deficit...greater than
trade deficit...less than
trade surplus...greater than
trade surplus...less than
A.trade deficit...greater than
B.trade deficit...less than
C.trade surplus...greater than
D.trade surplus...less than
Explanation / Answer
A trade deficit implies net exports are negative and a trade surplus implies net exports are positives.
Hence, it should be that the trade surplus occurs meaning that U.S. GDP for Situation 2 is greater than $18 trillion.
Hence the answer is C.