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Which transactions determine the balance of trade?
- a)Exports of goods and imports of goods
- b)Change in Borrowing and lending by the govt.
- c)Investment to and from abroad
- d)Borrowing and lending to and from abroad
Correct answer is option 'A'. Can you explain this answer?
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Which transactions determine the balance of trade?a)Exports of goods a...
Answer:
The balance of trade is determined by the transactions involving the exports and imports of goods. Here is a detailed explanation of the transactions that determine the balance of trade:
Exports of goods:
- When a country sells goods to other countries, it earns revenue from those exports.
- Exports contribute positively to the balance of trade as they add to the country's income.
Imports of goods:
- When a country purchases goods from other countries, it spends money on those imports.
- Imports contribute negatively to the balance of trade as they subtract from the country's income.
Change in Borrowing and lending by the government:
- While borrowing and lending by the government can affect the overall economy, they do not directly determine the balance of trade.
Investment to and from abroad:
- Investments made by foreign entities in a country and investments made by domestic entities abroad do not directly impact the balance of trade.
Borrowing and lending to and from abroad:
- Borrowing and lending to and from abroad, such as foreign loans or international aid, do not directly affect the balance of trade.
In summary, the balance of trade is primarily determined by the transactions involving the exports and imports of goods. Other economic factors, such as government borrowing, investments, and international borrowing, may have indirect effects on the balance of trade but are not the key determinants.
The balance of trade is determined by the transactions involving the exports and imports of goods. Here is a detailed explanation of the transactions that determine the balance of trade:
Exports of goods:
- When a country sells goods to other countries, it earns revenue from those exports.
- Exports contribute positively to the balance of trade as they add to the country's income.
Imports of goods:
- When a country purchases goods from other countries, it spends money on those imports.
- Imports contribute negatively to the balance of trade as they subtract from the country's income.
Change in Borrowing and lending by the government:
- While borrowing and lending by the government can affect the overall economy, they do not directly determine the balance of trade.
Investment to and from abroad:
- Investments made by foreign entities in a country and investments made by domestic entities abroad do not directly impact the balance of trade.
Borrowing and lending to and from abroad:
- Borrowing and lending to and from abroad, such as foreign loans or international aid, do not directly affect the balance of trade.
In summary, the balance of trade is primarily determined by the transactions involving the exports and imports of goods. Other economic factors, such as government borrowing, investments, and international borrowing, may have indirect effects on the balance of trade but are not the key determinants.
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Which transactions determine the balance of trade?a)Exports of goods and imports of goodsb)Change in Borrowing and lending by the govt.c)Investment to and from abroadd)Borrowing and lending to and from abroadCorrect answer is option 'A'. Can you explain this answer?
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