Adding globalization with large trade deficits to the standard AS/AD model shows:
A)reduced domestic production and consumption.
B)increased domestic production and consumption.
C)increased domestic production and reduced consumption.
D)decreased domestic production and increased consumption.

Question

Quizplus · Accepted Answer

Large trade deficits imply that a country is importing more than it is exporting, which can lead to decreased domestic production as foreign goods replace domestic goods. However, consumption may increase as consumers have access to a wider variety of goods at potentially lower prices.

Adding Globalization with Large Trade Deficits to the Standard AS/AD