Net exports is defined as exports minus imports. Because of this minus sign, net

Question

Net exports is defined as exports minus imports. Because of this minus sign, net exports can be negative or positive, depending on the sizes of exports and imports. If exports are greater than imports, then net exports are positive, resulting in a “trade surplus.” On the other hand, if imports are greater than exports, then net exports are negative, resulting in a “trade deficit.” Using this information, Situation (2) has a _____, meaning that U.S. GDP for Situation (2) is _____ $18 trillion.

trade deficit...greater than

trade deficit...less than

trade surplus...greater than

trade surplus...less than

trade deficit...greater than

trade deficit...less than

trade surplus...greater than

trade surplus...less than

Explanation / Answer

A trade deficit implies net exports are negative and a trade surplus implies net exports are positives.

Hence, it should be that the trade surplus occurs meaning that U.S. GDP for Situation 2 is greater than $18 trillion.

Hence the answer is C.

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