Question

Suppose the country of Lilliput exported $287 billion worth of goods and imported $481 billion worth of goods in the last calendar year.

a. Calculate Lilliput's balance of trade.
b. Which type of trade balance is Lilliput running?
-a trade deficit
-neither a trade deficit nor a trade surplus.
-a trade surplus

Answer 1

a) Lilliput's balance of trade for the last calendar year is a trade deficit of -$194 billion, which occurs when a country's imports exceed its exports.

b) Type of trade balance is Lilliput running is a trade deficit.

Step-by-step explanation:

The balance of trade for a country is calculated by subtracting the value of its imports from the value of its exports.

In Lilliput's case, it is given that the country exported goods worth $287 billion and imported $481 billion.

Balance of Trade = Exports - Imports
Balance of Trade = $287 billion - $481 billion
Balance of Trade = -$194 billion

This negative balance indicates that Lilliput imported more than it exported, resulting in a trade deficit.