Trade Deficit quiz 2

Question 1

3 causes of trade deficit

Answer 1

The value of imported finished goods is higher than exported raw materials.

Lower international Competitiveness of Domestic Industries

focus is on importing instead of producing within the borders

Question 2

3 Effects of Trade Deficit

Answer 2

A country requires more foreign exchange to cover the export-import gap.

Heavy reliance on imports reduces demand for domestic goods.

Increased unemployment.

Question 3

3 Advantages of Trade Deficit:

Answer 3

Provides a variety of products and services

competitive prices

Helps overcome the scarcity of goods and services in the short run.

Reduces the risk of inflation due to competitive pricing.

Question 4

3 Disadvantages of Trade Deficit:

Answer 4

Reduces domestic production, leading to unemployment.

heavy reliance on imported goods

small businesses that can NOT compete internationally shut down

Question 5

Trade Surplus vs Trade Deficit

Answer 5

Trade Surplus: Exports are greater than imports.

Trade Deficit: Imports are greater than exports.

Question 6

National Debt vs Trade Deficit

Answer 6

National Debt: Money owed by a country to financial institutions, or other countries; usually long-term.

Trade Deficit: Reflects short-term variations in the Balance of Payments.

Question 7

Years of persistent deficits can accumulate into __________

Answer 7

national debt.

Question 8

In the short term, a trade deficit is ______

In the long term, a trade deficit is ____

Answer 8

good

bad