In Considering the Net Effect of Expansionary Fiscal Policy on the Trade

Multiple Choice

In considering the net effect of expansionary fiscal policy on the trade deficit, the:

A) income effect offsets the price effect.
B) price effect offsets the income effect.
C) income and price effects work in the same direction, so the trade deficit is decreased.
D) income and price effects work in the same direction, so the trade deficit is increased.