ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Countries experience a trade deficit when imports are greaters than exports
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Net exports will increase when that country’s currency depreciates
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Exports are considered a debit in a country’s balance of trade
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The balance of payment is a summary of a country’s transactions with other countries
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Detailed explanation-1: -Answer and Explanation: The correct option is (a) International trade makes it possible for a country’s consumption possibilities to exceed its production possibilities.
Detailed explanation-2: -A debit represents the importing of an item such as a good, a service, a stock or a bond, a bank deposit, or gold. A debit adds to a nation’s demand for foreign currency.
Detailed explanation-3: -A country’s balance of trade is defined by its net exports (exports minus imports) and is thus influenced by all the factors that affect international trade. These include factor endowments and productivity, trade policy, exchange rates, foreign currency reserves, inflation, and demand.
Detailed explanation-4: -Explanation: Two countries generally make an international trade on some basis, such that economies of scale, different skills of the labor force, and so on. But, absolute advantage is not the basis for trade because trade can be made on the basis of comparative advantage.