Photo AI
You are given the following information about a country's trade in a year - Leaving Cert Economics - Question 7 - 2017
Question 7
You are given the following information about a country's trade in a year. Visible Exports Visible Imports €m €m 22,000 23,500... show full transcript
Worked Solution & Example Answer:You are given the following information about a country's trade in a year - Leaving Cert Economics - Question 7 - 2017
Step 1
Explain the term Balance of Trade.
Answer
The Balance of Trade is an economic indicator that represents the difference between a country's visible exports and visible imports. It measures the net exports of goods that a country produces and sells to other countries versus the goods that it purchases from abroad. A positive balance indicates a surplus, where exports exceed imports, while a negative balance indicates a deficit.
Step 2
Using the above data, calculate the Balance of Trade and state if it is a surplus or deficit.
Answer
To calculate the Balance of Trade:
Visible Exports: €22,000m Visible Imports: €23,500m
The formula for Balance of Trade is:
Balance of Trade = Visible Exports - Visible Imports
Substituting in the values:
Balance of Trade = €22,000m - €23,500m = -€1,500m
This indicates a deficit in the Balance of Trade.
Step 3
If the level of visible exports above increased by €2,000m, calculate the new Balance of Trade and state if it is a surplus or deficit.
Answer
To find the new Balance of Trade:
New Visible Exports = €22,000m + €2,000m = €24,000m Visible Imports remain €23,500m.
Now, using the same formula:
New Balance of Trade = New Visible Exports - Visible Imports
New Balance of Trade = €24,000m - €23,500m = €500m
Thus, the new Balance of Trade is a surplus of €500m.