If a country has y > c + i + g, then it has:

• A. a budget deficit
• B. a trade surplus
• C. a trade deficit
• D. no net exports

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the variables in the equation. Here, \( y \) represents the country's total output or income (GDP), \( c \) is consumption, \( i \) is investment, and \( g \) is government spending.
2. Step 2: Recall the national income identity for an open economy: \( y = c + i + g + nx \), where \( nx \) stands for net exports (exports minus imports).
3. Step 3: Rearrange the identity to isolate net exports: \( nx = y - (c + i + g) \). This shows that net exports equal total output minus domestic spending (consumption, investment, and government spending).
4. Step 4: Analyze the inequality \( y > c + i + g \). This means \( y - (c + i + g) > 0 \), so net exports \( nx \) are positive.
5. Step 5: Since net exports are positive, the country exports more than it imports, which defines a trade surplus.