ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Total exports tend to fall
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Total imports tend to fall
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Total imports tend to rise
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Imports and exports remain largely unchanged
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Detailed explanation-1: -International trading is not restricted to just goods and services alone. An open economy presents innumerable opportunities for global investments and technological advancements as well. With increased trade and economic growth, what improves is the Gross Domestic Product (GDP) of the economy.
Detailed explanation-2: -The National Income Identity for an Open Economy The GNP identity for open economies shows how the national income a country earns by selling its goods and services is divided between sales to domestic residents and sales to foreign residents.
Detailed explanation-3: -An open economy is a type of economy where not only domestic factors but also entities in other countries engage in trade of products (goods and services). Trade can take the form of managerial exchange, technology transfers, and all kinds of goods and services.
Detailed explanation-4: -A country has a trade deficit when the value of its imports exceeds the value of its exports. The impacts of trade deficits are frequently over-simplified. Trade deficits can be damaging but they also bring welcome economic benefits.