Using the information in this chapter, label each of the following statements true, false, or uncertain. Explain briefly.

a. The current U.S. trade deficit is the result of unusually high investment, not the result of a decline in national saving.

b. The national income identity implies that budget deficits cause trade deficits.

c. Opening the economy to trade tends to increase the multiplier because an increase in expenditure leads to more exports.

d. If the trade deficit is equal to zero, then the domestic demand for goods and the demand for domestic goods are equal.

e. A real depreciation leads to an immediate improvement in the trade balance.

f. A small open economy can reduce its trade deficit through fiscal contraction at a smaller cost in output than can a large open economy.

g. The experience of the United States in the 1990s shows that real exchange rate appreciations lead to trade deficits and real exchange rate depreciations lead to trade surpluses.

h. A decline in real income can lead to a decline in imports and thus a trade surplus.