Question

g Lydia, a citizen of Italy, produces scarves and purses that she sells to department stores in the United States. Other things the same, these sales a. increase U.S. net exports and have no effect on Italian net exports. b. decrease U.S. net exports and have no effect on Italian net exports. c. increase U.S. net exports and decrease Italian net exports. d. decrease U.S. net exports and increase Italian net exports.

Answer 1

d. decrease U.S. net exports and increase Italian net exports.

Step-by-step explanation:

As it is given that

Lydia, who is a citizen of Italy produced scarves and purses in order to sell to the department stores in the united states keeping other things constant. So the sales would reflect an increased in the net exports of Italian as she is a producer and sell its products to the united states and at the same time it decreased or decline the net exports of united states

The net exports is

= Exports - imports

Hence, the correct option is d.