A balance of trade surplus tends to....?

Question

A balance of trade surplus tends to:

A) occur when a country's exports are too expensive.

B) exert a contractionary effect on the economy.

C) occur when a country's exchange rate is too high.

D) exert an expansionary effect on the economy.

Answer 1

D) exert an expansionary effect on the economy.

A trade surplus means more exports are being produced than imports.  Since income comes from production, this is good for the economy.