Balance of Trade Concepts Quiz

Question 1

What is the main difference between international trade and balance of trade?

Accepted Answer

International trade is trade between countries, balance of trade is the difference between exports and imports

Answer

International trade is only imports, balance of trade is only exports

Answer

International trade deals only with goods, balance of trade deals with services

Answer

Both terms are synonymous and have the same meaning

Question 2

What is the trade balance called when a country's exports exceed its imports?

Accepted Answer

Trade surplus

Answer

Trade imbalance

Answer

Trade zero

Answer

Trade deficit

Question 3

What is the difference between trade deficit and trade surplus?

Accepted Answer

Trade deficit = imports > exports; Trade surplus = exports > imports

Answer

Both are the same

Answer

Trade surplus only occurs in developed countries

Answer

Trade deficit only occurs in developing countries

Question 4

Who proposed the theory of comparative advantage in international trade?

Accepted Answer

David Ricardo

Answer

Paul Samuelson

Answer

Adam Smith

Answer

John Maynard Keynes

Question 5

Which of the following is NOT a benefit of international trade?

Accepted Answer

Immediate prosperity of all local industries

Answer

Better utilization of resources

Answer

More choices for consumers

Answer

Increased economic growth

Question 6

Which items are included when calculating balance of trade?

Accepted Answer

Only visible goods

Answer

Only services

Answer

Money transfers and capital flows

Answer

Both services and investments

Question 7

What is the main difference between balance of trade and current account?

Accepted Answer

Balance of trade = goods; Current account = all goods, services, income and transfers

Answer

Both are exactly the same

Answer

Current account deals only with services

Answer

Balance of trade is the opposite of current account

Question 8

Which policy can a government adopt to increase exports in international trade?

Accepted Answer

Export subsidies and market expansion

Answer

Imposing restrictions on exports

Answer

Restrictions on foreign traders

Answer

Banning all imports

Question 9

What is the difference between protectionism and free trade?

Accepted Answer

Protectionism = import restrictions; Free trade = trade without barriers

Answer

Both are the same policies

Answer

Protectionism is beneficial for all countries

Answer

Free trade is only for developed countries

Question 10

What is the impact of imposing import tariff on balance of trade?

Accepted Answer

Decrease in imports improving trade balance

Answer

No impact

Answer

Automatic increase in exports

Answer

Increase in imports

Balance of Trade Concepts

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