Question

What happens in the short run when people in a country purchase more imported goods and few domestic goods? A) The trade balance will be unaffected and the equilibrium income will decrease B) The trade balance moves toward a surplus and the equilibrium income will decrease. C) The trade balance moves toward a deficit and the equilibrium income will decrease. D) The trade balance moves toward a deficit and the equilibrium income will increase.

Answer 1

Answer: the answer is C

Step-by-step explanation:

Answer 2

The correct answer is letter "C": The trade balance moves toward a deficit and the equilibrium income will decrease.

Step-by-step explanation:

If in an economy people import more products than the quantity they export, the trade balance will fluctuate towards imports. This will cause domestic products to be less demanded. As fewer domestic production is needed, less labor hand will be necessary which leads to an increasing rate in unemployment and a decrease in people's income.