What is a trade deficit?
A) When a country exports more than it imports
B) When a country imports more than it exports
C) When a country has a balanced trade
D) When a country’s foreign exchange reserves increase
What is a trade surplus?
A) When a country imports more than it exports
B) When a country exports more than it imports
C) When a country’s exports and imports are equal
D) When a country borrows from international lenders
Which of the following is a consequence of a trade deficit?
A) Increased foreign exchange reserves
B) Accumulation of foreign debt
C) Reduction in domestic production
D) Increased exports
Which of the following is a characteristic of a trade surplus?
A) The country has a net outflow of capital
B) The country has more imports than exports
C) The country earns more from exports than it spends on imports
D) The country needs to borrow capital from foreign lenders
A persistent trade deficit can lead to:
A) Decrease in domestic production
B) An increase in a country’s foreign exchange reserves
C) A reduction in foreign debt
D) An increase in exports
What could be a cause of a trade deficit?
A) Increased production and export capacity
B) Higher imports due to consumer demand for foreign goods
C) Low levels of foreign debt
D) Government restrictions on imports
Which of the following is a possible effect of a trade surplus on the domestic economy?
A) The country may experience inflation due to increased demand for goods
B) The country may need to reduce imports to maintain a surplus
C) The country will likely face a decrease in production capacity
D) The country may face a shortage of foreign exchange reserves
A trade deficit can lead to a:
A) Strengthening of the national currency
B) Rise in unemployment due to reduced production
C) Increase in national savings
D) Higher domestic interest rates
What is the effect of a trade surplus on a country’s currency?
A) It may cause the currency to depreciate due to higher imports
B) It generally strengthens the currency as demand for the country’s goods increases
C) It has no effect on the currency
D) It weakens the currency due to foreign currency inflows
Which of the following can result from a trade surplus?
A) A reduction in national income
B) A rise in the value of domestic currency
C) A higher foreign debt level
D) A decrease in foreign reserves
Which of the following is NOT likely to cause a trade deficit?
A) High demand for imported goods
B) A decrease in domestic production
C) A decrease in consumer spending on foreign products
D) A higher national savings rate
A country running a trade surplus could potentially:
A) Experience inflation due to an excess of domestic currency
B) Need to increase foreign borrowing
C) Face a decrease in foreign reserves
D) Have a declining currency value
Which of the following best describes a country with a trade deficit?
A) It is exporting more than it is importing
B) It is importing more than it is exporting
C) It has a balanced trade situation
D) It is investing abroad
The balance of payments reflects:
A) The country’s exports of goods and services only
B) The country’s imports and exports, including all financial transactions
C) Only the government’s financial transactions
D) The country’s tax revenues and expenditures
A trade deficit can result in:
A) An increase in capital inflows
B) Higher export revenues
C) Greater national debt if financed by borrowing
D) An increase in foreign reserves
Which of the following would most likely reduce a trade deficit?
A) An increase in domestic consumption of foreign goods
B) A decrease in export demand
C) An increase in tariffs on imported goods
D) A decrease in the value of the domestic currency
What does a trade deficit imply about a country’s economy?
A) The country is producing more than it consumes
B) The country is borrowing to finance imports
C) The country has high levels of savings
D) The country has an excess of exports over imports
Which of the following countries would most likely benefit from a trade surplus?
A) A country with high levels of external debt
B) A country with a strong industrial base
C) A country with a service-based economy
D) A country that imports more than it exports
What is one effect of a country maintaining a trade surplus for a long period?
A) The country’s foreign exchange reserves might increase
B) The country’s currency will become weaker
C) The country’s unemployment rate will increase
D) The country will need to borrow more from international markets
How can a country finance a persistent trade deficit?
A) By borrowing from foreign lenders
B) By reducing exports
C) By increasing domestic savings
D) By increasing tariffs on imports
Which of the following could be an indicator of a country facing a trade surplus?
A) Decreasing foreign currency reserves
B) Decreasing demand for exports
C) A rising value of the domestic currency
D) A decrease in foreign debt levels
What is likely to happen to a country’s economy if it continues to experience a trade deficit over the long term?
A) Economic growth may slow down due to reliance on foreign borrowing
B) Unemployment levels will decrease significantly
C) Exports will increase significantly due to a stronger currency
D) The country will face an economic boom
Which of the following would most likely help reduce a trade surplus?
A) A reduction in the value of the domestic currency
B) An increase in demand for imports
C) A decrease in domestic production
D) A reduction in export taxes
A country’s trade deficit may be financed through:
A) Selling foreign currency reserves
B) Borrowing from foreign banks and governments
C) Increasing domestic production
D) Reducing government spending
Which of the following is NOT a factor contributing to a trade surplus?
A) Strong export demand
B) A decline in the value of the domestic currency
C) Increased domestic consumption of foreign goods
D) A decrease in the price of domestic goods abroad
How can a trade surplus affect a country’s international relations?
A) It may lead to trade disputes with countries facing trade deficits
B) It increases the need for government intervention in the economy
C) It encourages the country to reduce its exports
D) It leads to stronger domestic economic conditions without external influence
