Chapter 8R, Problem 2MCQ

To determine

To find:

Term for difference between a country’s exports and imports of goods.

Answer to Problem 2MCQ

Option D is correct.

Explanation of Solution

Option D is correct

Merchandise trade balance shows the difference between country’s export and imports of goods in that country.

Option A is incorrect as balance of payments on current account shows trading of goods and services from home country and the rest of the world.

Option B is incorrect as balance of payments on financial account shows transactions of financial and unilateral transfers from home country and the rest of the world.

Option C is incorrect as balance of payments on capital account shows transactions of capital and investment between home country and rest of the world.

Option E is incorrect as balance of payments on transactions of goods and services shows sum of current and capital account with home and rest of the world.

Economics Concept Introduction

Terms of trade is the ratio of price index of exports of a country to imports of a country. If the value of exports is more than the value of imports, then terms of trade is said to be positive.