Question

A country purchases $3 billion of foreign-produced goods and services and sells $2 billion dollars of domestically produced goods and services to foreign countries. It has a. exports of $3 billion and a trade surplus of $1 billion.b. exports of $2 billion and a trade deficit of $1 billion.c. exports of $2 billion and a trade surplus of $1 billion.d. exports of $3 billion and a trade deficit of $1 billion.

Answer 1

The correct answer is option b.

Step-by-step explanation:

A country is purchasing $3 billion worth of foreign products, and selling $2 billion worth of domestic products in the foreign market.

This means that the imports of the country are $3 billion and the exports are $2 billion.

We can find if the country is in the trade balance, surplus or deficit by deducting imports from exports. If the difference is zero, the country is in the trade balance. If the difference is positive, the country is having a trade surplus. And if the difference is negative, the country is having a trade deficit.

Exports - Imports

= $2 billion - $3 billion

= -$ 1 billion

The country is having a trade deficit of $1 billion.