Which of the following can improve the trade balance between the US and other countries? I....

Which of the following can improve the trade balance between the US and other countries?

I. When US citizens visit other countries

II. When French tourist visit the US

III. When German investors buy homes in the US

IV. When US citizens buy an Apple product

A- I only

B- II only

C- II and III only

Solutions

Expert Solution

C. II and III only is the correct answer.

Tourism is considered an exporting sector and helps in improving the balance of trade and balance of payment of the home country. Developed economies attract the foreigners to visit the countries and consume goods and services that bring in the foreign currency. The given cases are explained as below:

I. When US citizens visit other countries, US currency would be paid to that other country, indicating an outflow of the currency. This situation would not improve balance of trade and would bring defecit in balance of trade.

II. When french tourist visit the US, French currency inflow would be seen in the US, considered as export. US goods and services are being consumed in this case. This would improve the trade balance.

III. When German investors buy home in the US, foreign currency inflow is seen. This is an investment in the US which is again, considered as an export. This would improve the trade balance.

IV. When US citizens buy an Apple product, no other country is involved. The transaction would remain within the US only. This wouldn't impact the trade balance with other countries.

Hence, option C is the correct answer.

jeff jeffy answered 1 year ago

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