Question

What is the most common method of measuring flows of trade?

1) amount of physical items transported between countries
2) amount of manufactured items transported by truck
3) comparing annual amounts of goods and services exchanged between countries
4) comparing exports of goods, services, and financial capital between countries

Answer 1

The most common method of measuring trade flows today is by comparing the annual amounts of goods and services exchanged between countries, known as the current account balance, which includes other international flows of income. The correct option is 3.

Step-by-step explanation:

The most common method of measuring flows of trade is by comparing annual amounts of goods and services exchanged between countries. This includes tracking the flow of goods and services, as well as financial payments and investments, which make up the current account balance.

A few decades ago, the merchandise trade balance, which accounts for physical items transported, was commonly used. However, with advances in technology and the rise of service-based economies, broader measures like the balance of trade and current account balance, which include services and other international flows of income such as foreign aid, are now more commonly relied upon by economists.