Question

Trade surpluses and trade deficits can be __________________ for an economy in certain circumstances.

a) beneficial

b) harmful

c) either a or b

d) neither a or b

Answer 1

c) either a or b

Step-by-step explanation:

Trade surplus refers to when the value of a country's exports exceeded its imports.

Trade deficit refers to when the value of a country's import exceeds its exports.

Trade surplus can be beneficial as its tends to enable the exporting country earn foreign exchange thereby boosting its foreign reserves.

Whereas on the other hand, it can lead to deficits as the importing country would need to spend more foreign exchange getting the products and then depleting its foreign reserves.

Answer 2

C) Either a or b.

Step-by-step explanation:

Trade surpluses occurs when a country exports more than it imports and trade deficit occurs when a country imports more than it exports.

Although economy of every country is different, some survive at imports and some at exports, circumstances also play an important role.

• Such as the country has lack of money yet it's incurring a trade deficit this will be harmful. Take an example of Pakistan's economy, they have less money yet they are importing and this is harming their own economy.
• When the country has lots of money, and it's importing goods from outside, it will be beneficial for it. Take an example of Saudi Arabia, they have money and they are importing goods from outside, which is not damaging their economy.