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Chapter 10: Q. 22 (page 266)

If imports exceed exports, is it a trade deficit or a trade surplus? What about if exports exceed imports?

Short Answer

Expert verified

i. Trade Deficit

ii. Trade Surplus

Step by step solution

01

Step1. Introduction

Imports refer to the buying of goods/services from the foreign countries.

Exports refer to the selling of goods/services to the foreign countries.

02

Step2. Explanation

When imports exceed exports, it implies their is more outflow of money than inflow. Hence, it is called Trade deficit.

When exports exceed imports, it implies their is more inflow of money than outflow. Hence, it is called Trade Surplus.

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If domestic investment increases, and there is no change in the amount of private and public saving, what must happen to the size of the trade deficit?

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