Question

Which of these will increase the United States trade deficit?

a
Mexican consumers buying American cars

b
an increase in French tourism to the United States

c
a decrease in the international value of the dollar

d
American firms purchasing industrial equipment from German companies

Answer 1

The correct answer is D) American firms purchasing industrial equipment from German companies.

The balance of trade is the difference between a nation's exports and imports in a given period. A nation is considered to have a trade surplus when its exports exceed its imports. On the other hand, it is considered to have a trade deficit when its imports exceed its exports.

The United States currently holds a trade deficit. In this case, the purchase of German equipment represents a contribution to the total imports of the United States. Therefore, there is a growth in the trade deficit of the country.