GENERAL KNOWLEDGE

AN UNFAVOURABLE BALANCE OF TRADE FOR A COUNTRY MEANS THAT HER

  • A. imports exceed exports ✓
  • B. visible exports exceed invisible import
  • C. invisible exports exceed visible exports
  • D. imports and exports are equal

 

The answer to the question is: A. imports exceed exports

This situation occurs when the value of a country’s imports of goods and services exceeds the value of its exports. It leads to a trade deficit, which can have various economic implications for the country.

When a country has an unfavorable balance of trade, it means that it is spending more on foreign goods and services than it is earning from its own exports. This can lead to a decrease in the country’s foreign exchange reserves, as it needs to pay for the excess imports with its own currency or other assets. Additionally, a trade deficit can also lead to a decrease in domestic production and employment, as domestic industries may struggle to compete with cheaper imported goods.

Furthermore, an unfavorable balance of trade can also impact a country’s overall economic growth and development. It may lead to an increase in the country’s external debt as it borrows to finance the trade deficit. This can result in a higher debt burden and potential difficulties in servicing the debt in the future.

In conclusion, an unfavorable balance of trade occurs when a country’s imports exceed its exports, leading to various economic challenges such as decreased foreign exchange reserves, potential impact on domestic industries, and increased external debt.

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