IGCSE Economics Paper-1: Specimen Questions with Answers 30 - 30 of 64

Question 30

Question

MCQ▾

What will happen if the US government removes the quota on the import of cars?

Choices

Choice (4)

a.

Balance on trade in goods-Worsens, Balance on trade in services-No change

b.

Balance on trade in goods-Improves, Balance on trade in services-Worsens

c.

Balance on trade in goods-Worsens, Balance on trade in services-Worsens

d.

Balance on trade in goods-Improves, Balance on trade in services-No change

Answer

a.

Explanation

  • BOT measures the relative strength of a country՚s economy. The balance of trade is also known as the trade balance or the international trade balance. A country has a trade deficit if it imports more goods and services than it exports in terms of value. On the other hand, a country that exports more goods and services than it imports has a trade surplus.
  • The formula for calculating the Balance of Trade will be,
    • BOT
  • Countries use quotas in trade to regulate the volume of trade between them and other countries. Countries sometimes impose them on specific products to reduce imports and increase domestic production. Quotas boost domestic production by restricting imports.
  • If US government removes quota then the balance of trade and services both will worsen, as the gap between both the accounts will increase.

🎯 Select Paper