There is a trade-off between the objective of reducing a trade deficit and the objective of reaching full employment because:(A)Net exports rise as income increases(B)As income increases, the trade deficit rises(C)Imports fall as income increases(D)Fiscal policy and monetary policy must be used to achieve the objective

Answer 1

(B) In full employment, people have more money to buy foreign imports, while exports don't change much. This will tend to worsen the deficit. Similarly, trying to reduce the trade deficit by putting up tariff barriers will also reduce exports and income levels, and will also Americans to buy more expensive or (in many cases) less desirable domestic products.