Understanding the Importance of Trade Balance in Goods and Services

The video explains the concept of trade balance, highlighting its role as an indicator of a country's competitiveness in global markets. It discusses how exports and imports affect a country's trade account, with exports bringing foreign money in and imports causing an outflow. The video also covers the implications of trade deficits and surpluses on aggregate demand, noting that a deficit can lead to a decrease in demand, while a surplus can increase it. The importance of considering both price and non-price factors in determining competitiveness is emphasized.

What does a positive trade account indicate about a country's exports?

• The country is not involved in international trade.

• The country has a balanced trade account.

• The country is exporting more than it imports.

• The country is importing more than it exports.

What does a balanced trade account mean?

• Import expenditure is greater than export revenue.

• Export revenue is greater than import expenditure.

• The country does not engage in trade.

• Export revenue equals import expenditure.

How does a trade deficit affect a country's aggregate demand?

• It stabilizes the aggregate-demand curve.

• It causes an inward shift in the aggregate-demand curve.

• It has no impact on the aggregate-demand curve.

• It causes an outward shift in the aggregate-demand curve.

What happens to the net-exports component of aggregate demand when a country has a trade surplus?

• It becomes negative.

• It remains unchanged.

• It becomes positive.

• It becomes zero.

Why is it important to consider a country's trade balance?

• It only affects the country's import policies.

• It reflects the competitiveness and economic state of the country.

• It is irrelevant to the country's economic condition.

• It determines the country's population growth.