Which of the Following Will Occur in a Small Country

Multiple Choice

Which of the following will occur in a small country with a high marginal propensity to import?

A) Changes in government spending will cause large changes in the income balance.
B) A depreciation will cause only small changes in the trade balance.
C) Changes in government spending will cause large changes in output.
D) Changes in government spending will cause large changes in the trade balance.
E) There is no combination of policies that can eliminate the trade deficit.