Chapter 41, Problem 4MCQ

To determine

The correct option for the trade balance.

Answer to Problem 4MCQ

Option e is correct.

Explanation of Solution

Explanation for the correct option:

e.

Balance of trade or BOT represents the value of exports minus the value of imports. In other words, it represents the value of goods and services traded across the country in one year. Therefore, option e is correct.

Explanation for incorrect options:

a.

Capital inflow refers to the sales of an asset.

b.

Capital outflow is recorded in the financial account if any asset is purchased.

c.

Net capital flow refers to the difference between cash inflows and cash outflows.

d.

The trade balance will be negative if imports are greater than exports.

Economics Concept Introduction

Balance of payment: Balance of payment is the recording of transactions that occur with one country and the rest of the world over a financial period. It records the trading of goods and services and transfers payments.