The concept of variable net exports is that as domestic income (Y) increases,
A)exports will increase
B)exports will decrease
C)imports will decrease
D)imports will increase
E)imports and exports will remain constant

Question

Quizplus · Accepted Answer

As domestic income (Y) increases, consumers tend to buy more goods and services, including imported ones. This leads to an increase in imports, which in turn reduces net exports. Therefore, variable net exports decrease as domestic income increases, leading to more imports and fewer exports. Therefore, option D is the correct answer.

The Concept of Variable Net Exports Is That as Domestic