/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q. 25 Does a trade surplus mean an ove... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 10: Q. 25 (page 266)

Does a trade surplus mean an overall inflow of financial capital to an economy, or an overall outflow of financial capital? What about a trade deficit?

Short Answer

Expert verified

Overall inflow for surplus and outflow for deficit.

Step by step solution

01

Step1. Introduction

Trade deficit is a situation when imports exceed exports.

Trade surplus is a situation when exports exceed imports.

Balanced trade is a situation when exports and imports are equal.

02

Step2. Explanation

In trade surplus, it implies export exceed imports. Export means selling of goods and services outside the country. As goods are sold, money flows in. Hence, trade surplus is a situation of overall inflow of financial capital.

Similarly, trade deficit means imports are more, i.e. purchasing. So, money will flow out. Hence, trade deficit is a situation of overall outflow of financial capital.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Describe a scenario in which a trade surplus benefits an economy and one in which a trade surplus is occurring in an economy that performs poorly. What key factor or factors are making the difference in the outcome that results from a trade surplus?

How does the bottom portion of Figure 10.3, showing the international flow of investments and capital, differ from the upper portion?

State whether each of the following events involves a financial flow to the U.S. economy or away from the U.S. economy:

a. Export sales to Germany

b. Returns paid on past U.S. financial investments in Brazil

c. Foreign aid from the U.S. government to Egypt

d. Imported oil from the Russian Federation

e. Japanese investors buying U.S. real estate

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?

Why does a recession cause a trade deficit to increase?
See all solutions

Recommended explanations on Economics Textbooks

Taxation Economics

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.