Why would a country want a favorable balance of trade?

Why would a country want a favorable balance of trade?

A favorable balance of trade is achieved when the value of a colonies exports are greater than the value of their imports. By establishing a favorable trade balance, nations could then build their supplies of gold and silver and thereby build wealth for the mother countries in Europe.

How can balance of trade be favorable?

We determine a country’s balance of trade by subtracting the value of its imports from the value of its exports.

1. If a country sells more products than it buys, it has a favorable balance, called a trade surplus.
2. If it buys more than it sells, it has an unfavorable balance, or a trade deficit.

Which country has favorable balance of trade?

In 2020, China was the country with the highest trade surplus with approximately 535.37 billion U.S. dollars. Typically a trade surplus indicates a sign of economic success and a trade deficit indicates an economic weakness.

What is the Favourable balance of trade?

Definition: Favorable balance of trade is a positive situation where a country exports more goods and services than what it imports. It is an economic term that refers to the existence of a surplus in the nation’s balance of trade.

Why is Favourable balance of trade desired for an economy?

Answer : The difference between export and import gives the balance of trade of a country. Favourable trade balance in a country is desired for an economy as it increases the economic growth rate of the country. More export leads to more incoming of foreign exchange which helps in filling the deficit in the longer run.

What is a balance of trade and how could Nations create a more favorable one?

Balance of Trade, in commerce, the term commonly used to express the difference between the value of the exports from, and imports into a country: the balance used to be said to be favorable when the value of the exports exceeded that of the imports, and unfavorable when the value of the imports exceeded that of the …

Could a country have a Favourable balance of trade and an Unfavourable balance of payments in the same year Why or why not?

Yes, a nation can have a favorable balance of trade and an unfavorable balance of payments. This is so because a favorable balance of trade means the exports are more than a country’s imports. In contrast, an unfavorable balance of payment means expenditure is more than the government’s revenue.

How is the favorable balance of trade an indicator of economic development of a country?

The favourable balance of trade indicates the exports are greater than imports and it is known as trade surplus. The trade surplus has a positive impact on the development of the country and the positive impacts are: It increases the revenue of the economy as a whole because exports are revenue for the country.

What is an unfavorable balance of trade?

Unfavorable Balance of Trade. The value of a nation’s imports in excess of the value of its exports.

Can a nation have a favorable balance of trade and an unfavorable balance of payments?

Yes, a nation can have a favorable balance of trade and an unfavorable balance of payments. This is so because a favorable balance of trade means the exports are more than a country’s imports. Thus a country can have an unfavorable balance of payment while having a favorable balance of trade.

What is Favourable and Unfavourable balance of trade?

If the exports of a country exceed its imports, the country is said to have a favourable balance of trade, or a trade surplus. Conversely, if the imports exceed exports, an unfavourable balance of trade, or a trade deficit, exists.

What leads to Unfavourable balance of trade?

The difference between exports and imports is called the balance of trade. If imports are greater than exports, it is sometimes called an unfavourable balance of trade. Includes all those visible and invisible items exported from and imported into the country in addition to exports and imports of merchandise.

What does it mean when a country has a favorable trade balance?

Most nations view that as a favorable trade balance. When exports are less than imports, it creates a trade deficit. Countries usually regard that as an unfavorable trade balance. But sometimes a favorable trade balance, or surplus, is not in the country’s best interests.

Why is a trade surplus considered a favorable trade balance?

Favorable Trade Balance. Most countries try to create trade policies that encourage a trade surplus. They consider a surplus a favorable trade balance because it’s like making a profit as a country. Nations prefer to sell more products and receive more capital for their residents. It translates into a higher standard of living.

What does it mean when a country has a trade deficit?

When a country’s exports are greater than its imports, it has a trade surplus. Most nations view that as a favorable trade balance. When exports are less than imports, it creates a trade deficit. Countries usually regard that as an unfavorable trade balance.

How can a nation increase its wealth and power?

According to the theory of mercantilism, a nation could increase its wealth and power in two ways. First, it could obtain as much gold and silver as possible. Second, it could establish a favorable balance of trade, in which it sold more goods than it bought