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Question
From the following statements, choose the correct statement:
Options
Trade deficit refers to the excess of 'total value of exports' over the 'total value of imports' of goods and services.
Trade surplus refers to the excess of 'total value of import' over the 'total value of exports' of goods and services.
Current account deficit in a nation occurs when the foreign exchange receipts in current account fall short of foreign exchange payments in current account.
Current account surplus in nation occurs when the credit items of Balance of Payments are less than the debit items of Balance of Payments.
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Solution
Current account deficit in a nation occurs when the foreign exchange receipts in current account fall short of foreign exchange payments in current account.
Explanation:
A current account deficit happens when a country's foreign exchange receipts fall short of its foreign exchange obligations.
Options A is incorrect since a trade imbalance occurs only when the total value of imports exceeds the total value of exports.
Option B is incorrect since a trade surplus arises when the total value of exports exceeds the total value of imports.
Option D is incorrect because a current account surplus develops when credit items in the Balance of Payments' current account exceed debit items.
