105k views
3 votes
When the dollar value of imports exceeds the dollar value of exports, the balance of trade is in a:

MCQ Options:
a. Surplus
b. Deficit
c. Equilibrium
d. Recession

1 Answer

4 votes

Final answer:

The balance of trade is in a deficit when a country's imports exceed its exports. This situation, known as a trade deficit, reflects that the country is a net consumer in international trade, potentially leading to increased foreign borrowing or investment.

Step-by-step explanation:

When the dollar value of imports exceeds the dollar value of exports, the balance of trade is in a deficit. The balance of trade measures the difference between a nation's exports and imports. A trade deficit occurs because a country is importing more than it is exporting, meaning it is buying more goods and services from abroad than it is selling. This can occur for a variety of reasons, such as a country's currency value decreasing relative to others, making imports more expensive and exports cheaper for foreign buyers.

It's important to understand the implications of trade deficits. They can indicate that a country is a net consumer in the global marketplace, which sometimes leads to increased foreign investment and borrowing. Conversely, a significant trade surplus can occur during a recession due to the decreased demand for imports, whereas exports may not decline as rapidly.

User Archytect
by
8.0k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories