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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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Most popular questions from this chapter

Explain briefly whether each of the following would be more likely to lead to a higher level of trade for an economy, or a greater imbalance of trade for an economy.

a. Living in an especially large country

b. Having a domestic investment rate much higher than the domestic savings rate

c. Having many other large economies geographically nearby

d. Having an especially large budget deficit

e. Having countries with a tradition of strong protectionist legislation shutting out imports

Does a trade surplus help to guarantee strong economic growth?

Imagine that the economy of Germany finds itself in the following situation: the government budget has a surplus of 1% of Germany鈥檚 GDP; private savings is 20% of GDP; and physical investment is 18% of GDP.

a. Based on the national saving and investment identity, what is the current account balance?

b. If the government budget surplus falls to zero, how will this affect the current account balance?

If a country is a big exporter, is it more exposed to

global financial crises?

If a country is running a government budget surplus, why is (T 鈥� G) on the left side of the saving investment identity?
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