Exports of goods (merchandise) and services minus the imports of goods and services equals ________.
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A. B. C. D.D
When the balance of service exports and imports are added to the balance of merchandise trade the balance on goods and services is obtained.
The correct answer is C. balance on current accounts.
The balance on current accounts is calculated by subtracting the imports of goods and services from the exports of goods and services. It represents the net value of a country's international transactions in goods and services.
To understand this concept more thoroughly, let's break down the components involved:
Exports of goods and services: This refers to the value of goods and services produced within a country's borders and sold to other countries. It includes tangible goods like machinery, vehicles, and agricultural products, as well as intangible services such as tourism, transportation, and financial services.
Imports of goods and services: This represents the value of goods and services purchased by a country from other nations. It includes both tangible goods and intangible services.
When we subtract the imports of goods and services from the exports of goods and services, we obtain the net balance. A positive balance indicates that the value of exports exceeds the value of imports, resulting in a trade surplus. Conversely, a negative balance indicates a trade deficit, where the value of imports exceeds the value of exports.
The balance on current accounts encompasses a broader perspective by considering not only merchandise (goods) trade but also services trade. It reflects the overall balance of a country's international transactions in goods and services, capturing both the trade balance and the balance of services.
The other answer options provided are not as accurate:
A. Current account: While the balance on current accounts contributes to the current account, it does not fully represent it. The current account also includes other components, such as net income from abroad (e.g., interest, dividends) and net unilateral transfers (e.g., foreign aid, remittances).
B. Balance of merchandise trade: This answer option only considers the trade balance in goods (merchandise). It does not account for services, which are an essential component of a country's international trade.
D. Balance on goods and services: This answer option seems similar to the correct answer, but it is not a commonly used term. The more widely accepted term is the "balance on current accounts," which encompasses both goods and services.
In summary, the correct answer is C. balance on current accounts, as it accurately represents the net balance of a country's exports and imports of goods and services.