If a country imports more than it exports:
A)net exports will increase, causing aggregate expenditure to rise and leading to an increase in equilibrium GDP.
B)net exports will decrease, causing aggregate expenditure to fall and leading to a decrease in equilibrium GDP.
C)the currency will appreciate, leading to a rise in aggregate expenditures.
D)aggregate expenditure will rise, leading to an increase in equilibrium GDP.

Question

Quizplus · Accepted Answer

If a country imports more than it exports, its net exports will be negative. This means that the country is spending more on foreign goods than it is earning from selling its own goods abroad. As a result, aggregate expenditure will fall because there is less demand for domestically produced goods. This will lead to a decrease in equilibrium GDP as firms reduce output and employment to match the lower level of demand.

If a Country Imports More Than It Exports