AP Macroeconomics Question 440: Answer and Explanation

Test Information

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Question: 440

3. Which of the following might worsen a nation's trade deficit?

  • A. Lower wages relative to other nations.
  • B. Lower taxes on corporate profits relative to other nations.
  • C. A higher interest rate on financial assets relative to other nations.
  • D. A higher rate of inflation relative to other nations.
  • E. Other nations remove tariffs and quotas on foreign imports.

Correct Answer: D

Explanation:

D-Higher inflation to other nations causes goods to be more expensive relative to those produced abroad, causing a drop in net exports.