C选项high level of income对trade balance的影响

问题如下：

Question

In a country with a high level of income, as domestic income rises, it is most likely that an increase will occur in:

选项：

A.the fiscal balance. B.private saving and investment. C.the trade balance.

解释：

Solution

B is correct. In a country with a high level of income, as domestic income rises, private saving and investment will increase.

A is incorrect. The fiscal balance is given by G – T. An increase in domestic income leads to an increase in net taxes. Government’s fiscal balance will decrease (smaller deficit or larger surplus).

C is incorrect. The trade balance is given by X – M. An increase in domestic income leads to an increase in imports and lower net exports. The trade balance will decrease.