ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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trade balance moves towards a deficit and equilibrium GDP decreases
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trade balance moves towards a deficit and GDP increases
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trade balance moves towards a surplus and GDP increases
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trade balance in unaffected and equilibrium GDP decreases
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Detailed explanation-1: -If exports exceed imports then the country has a trade surplus and the trade balance is said to be positive. If imports exceed exports, the country or area has a trade deficit and its trade balance is said to be negative.
Detailed explanation-2: -If a country exports a greater value than it imports, it has a trade surplus or positive trade balance, and conversely, if a country imports a greater value than it exports, it has a trade deficit or negative trade balance.
Detailed explanation-3: -In classic economic theory, countries with a trade deficit will see its currency weaken, whilst those with a trade surplus will see its currency strengthen. Consistent trade deficits can negatively impact the domestic nation through lost jobs, deflation, and government finances.
Detailed explanation-4: -When a country does not produce everything, it needs and imports products from other countries and pays import taxes, it causes a trade deficit. This is known as the current action deficit. It can also occur when companies are involved in the manufacturing of products in a foreign country.