ECONOMICS
BALANCE OF TRADE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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More money is going out of the country
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More money is coming into the country
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The amount of money going out of the country and coming into the country is equal
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None of the above
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Detailed explanation-1: -A negative balance of trade means that currency flows outwards to pay for exports, indicating that the country may be overly reliant on foreign goods.
Detailed explanation-2: -A trade deficit creates downward pressure on a country’s currency under a floating exchange rate regime. With a cheaper domestic currency, imports become more expensive in the country with the trade deficit. Consumers react by reducing their consumption of imports and shifting toward domestically produced alternatives.
Detailed explanation-3: -A country has a negative balance of trade it means the balance of payments on current account should be same as balance of trade. The balance of trade is the difference between the value of a country’s imports and exports for a given period.
Detailed explanation-4: -Trade deficits are bad Notably, trade deficits allow countries to consume more than they produce.
Detailed explanation-5: -A “negative” balance of trade means that the value of goods and services being imported is greater than the value of goods and services being exported. A “positive” balance of trade means that the value of goods and services being exported is greater than the volume of goods and services being imported.