ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Importing high quality goods and services
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Exporting goods and services
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Investing abroad
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Investing locally
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Detailed explanation-1: -However, as previously mentioned, an imbalance in the imports and exports will cause a disruption with the country’s economy. Some of the negative impacts it can cause are the distortion of the country’s trade, badly influence the Gross Domestic Product (GDP), and devalue the country’s currency.
Detailed explanation-2: -A deficit in the balance of payments leads to a higher demand for foreign currency to the detriment of national currency which would depreciate in this situation. However, an exceeding account balance involves a high amount of foreign currency for which the national currency would be exchanged.
Detailed explanation-3: -Tariffs hurt consumers because it increases the price of imported goods. Because an importer has to pay a tax in the form of tariffs on the goods that they are importing, they pass this increased cost onto consumers in the form of higher prices.
Detailed explanation-4: -Foreign exchange risk. There is the danger that there will be a sudden large change in the currency exchange rate. Piracy risk. Even if rare, this possibility must be considered. Political risk. There are many scenarios where this may be a hindrance. Legal risk. Cultural risk.