Question

5. Which of the following factors affects a country's exports, imports, and net exports?
(x) international trade policy
(y) consumer tastes at home and abroad
(z) prices of domestic and foreign goods
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only

6. Suppose the value of the goods and services that Australia purchases from the U.S. are less than the value of goods and services that the U.S. purchases from Australia. The U.S. has
A. positive net exports with Australia and a trade surplus with Australia.
B. positive net exports with Australia and a trade deficit with Australia.
C. negative net exports with Australia and a trade surplus with Australia.
D. negative net exports with Australia and a trade deficit with Australia.
E. None of the above

which of the following statements is (are) correct?
(x) One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports. As a result its trade deficit rose.
(y) If a country had a trade surplus of $100 billion and then its exports rose by $40 billion and its imports rose by $30 billion, its balance of trade would now be $90 billion.
(z) If a country had a trade deficit of $40 billion and then its exports rose by $6 billion and its imports rose by $4 billion, its trade deficit would reduce to $38 billion.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

Answer 1

5. International trade policies like tariff, quota, VER and other trade restrictions affect the export from one country. If a country follows more trade restrictions, its import decrease and the net export increase. Trade restrictions followed by the other country reduce the export and thereby net export decrease.

The taste and preference in countries affect the import and export and net export. More taste in the domestic economy towards foreign goods increase a country’s import and reduce net export. Foreign consumers taste and preferences towards the domestic goods increase a country’s export and net export balances.

Price difference between countries also changes the import and export and net export. If domestic price is higher, there will be more import into the country and thus net export decrease. If the domestic price is lower than the price in the rest of the world, there will be more export and net export balances increase.

Answer: A. (X), (Y) and (Z).

6. The value of goods and services in U.S compared to Australia stimulate more export from U.S to Australia and less import from Australia to U.S. Thus U.S will have a positive net export and trade surplus with Australia.

Answer: positive net export with Australia and a trade surplus with Australia.

7.(X).The deficit in the balance of trade is caused by negative net export (import is greater than export). The additional increase in import will increase the trade deficit. This statement is correct.

(Y) The existing trade surplus is $100 billion, the export increase by $40 billion, The increase in import is $30 billion. The balance of trade= Export-import= 100+40-30=110. This statement is incorrect.

(Z) The total trade deficit = $40 billion +$4 billion (increase in import)=$44 billion. Trade deficit = $44 billion - $6 billion = $38 billion. This statement is correct.

Answer: C. (X) and (Z) only