During the 2007–2009 recession, why did U.S. net exports increase?

• A. U.S. imports fell more sharply than exports due to decreased domestic demand.
• B. Foreign economies grew rapidly, increasing demand for U.S. exports.
• C. The U.S. dollar appreciated, making U.S. goods more expensive abroad.
• D. U.S. government increased tariffs on imported goods, reducing exports.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of net exports, which is defined as the value of a country's exports minus its imports, mathematically expressed as \(\text{Net Exports} = \text{Exports} - \text{Imports}\).
2. Step 2: Analyze the economic conditions during the 2007–2009 recession, focusing on how domestic demand in the U.S. changed and how this affected imports and exports.
3. Step 3: Recognize that during a recession, domestic demand typically falls, leading to a reduction in imports because consumers and businesses buy fewer foreign goods.
4. Step 4: Consider the behavior of exports during this period, noting whether foreign economies were growing or contracting, which influences their demand for U.S. goods.
5. Step 5: Conclude that if U.S. imports fell more sharply than exports due to decreased domestic demand, net exports would increase, even if exports themselves did not rise significantly.