Question

In the U.S. trade deficit during the 1980s was due largely to the rise in the U.S. budget deficit. On the other hand, some in the popular press have claimed that the increased trade deficit resulted from a decline in the quality of U.S. products relative to foreign products. Assume that U.S. products did decline in relative quality during the 1980s. This caused net exports at any given exchange rate to: __________

Answer 1

Answer: Decline

Step-by-step explanation:

If U.S. goods fall in quality, less people will demand the goods which will lead to a fall in U.S. exports.

As U.S. goods are denominated in dollars, a fall in the demand for US exports is akin to a fall in demand for the US dollar.

The US dollar gets weaker so the exports at every exchange rate will fall.

Net exports is calculated by subtracting imports from exports so net exports will decline as a result of exports falling.