BALANCE OF PMT/BALANCE OF TRADE- DRAW IMAGES ON BACK
1. How is the balance of trade calculated? By subtracting imports from exports. Draw an
image to reflect this.
2. The goods and services trade balance counts both _______ and _______ of goods and
services. This measure is increasingly useful because service trade has increased
substantially in recent years.
3. When exports exceed imports, a nation is said to have a trade _____. Draw an image to
reflect this.
4. When imports exceed exports, a nation is said to have a trade _____. Draw an image to
reflect this.
5. T/F There is no reason at all for exports and imports to be evenly balanced between any
two particular countries; instead, it is expected that most countries will have trade deficits
with some countries and trade surpluses with other countries.
6. T/F It is wise to presume that trade surpluses are always desirable and trade deficits are
always undesirable. Draw an image to reflect this.
7. T/F In any given year some nations are likely to have trade surpluses and others to have
trade deficits.
8. When a nation experiences substantial trade deficits for a sustained period of time, there
is no reason to be concerned that the country continues to consume high levels of
imported products indefinitely. In this situation, some combination of changes in
exchange rates, national saving and other factors will eventually curtail the trade deficits.
9. When exports occur, the flow of goods headed in one direction out of the country is
matched by a flow of payments coming back into the country. Draw an image to reflect
this.
10. Similarly, when imports occur, the flow of goods arriving in the country is matched by a
flow of payments leaving the country. Draw an image to reflect this.
11. The balance of payments refers to the funds received by a country and those paid by a
country for all international transactions. The balance of payments includes payments
related to exports and _____ of ______; payments related to the international flow of
_____, gifts or ______; and payments for physical and ______ ________ such as rental
payments or interest payments.
12. It includes all transactions by the individuals, ____ and government agencies of one
______ and the rest of the world. When the balance of payments includes all inflows
and outflows, by definition they must be equal--___________.
13. People often confuse the balance of trade with the balance of payments. The balance of
payments is a broader measure of international transactions than the balance of trade.
The balance of trade considers a nation's ______ and _____ of goods and services,
while the balance of payments considers all international ______ transactions including
the current account, the capital account and official reserves.
14. When thinking about a nation's balance of payments, it's important to realize that it
always "________," unlike a balance of trade, which may show either a _______or a
____________.
15. Many believe that the purpose of international trade is to have the _______ balance-oftrade surplus possible.
16. Should the resources of a country be used exclusively to get money from other countries
in exchange for goods and services, or would it be best for a country to use the foreign
exchange received by selling goods and services to other countries to buy and enjoy
other goods and services from other countries? Yes/No WHY? The purpose of
international trade is to___________________________________________________