how does a trade deficit occur?

question 16 options:

the value of the products a country exports exceeds the value of the products it imports.

the value of the products a country imports exceeds the value of the products it exports.

the value of the products a country imports falls below the value of the products it exports.

the value of the products a country imports matches the value of the products it exports.

B: The value of the products a country imports exceeds the value of the products it exports.

Explanation:

A trade deficit is bad news for any country, as this can result in substantial financial loss, thus engendering debt. Should this happen, a country's stock market could take a significant hit, which would not be ideal. Remember the consequences of each time the American stock market has crashed, you'll get a fairly accurate picture.

To further explain, a trade deficit occurs whenever a country is importing more than it is exporting, which can refer to both quantity and/or value. This is a common issue for rapidly developing countries, as growing countries oftentimes require an abundance of goods and materials that they are unable to match, at the time, in their exports. For example, imagine a country that is undergoing industrialization. They would require an abundance of crafting materials like copper, irons, steels, precious metals, concrete, woods, etc. They would NOT be able to match this excessive amount of importing through their exports, as they would not be nearly developed enough to do so in comparison.

While the above reason is generally taken as a somewhat better option (remember, a sign that a country is developing is relatively a good thing. Having an abundance of imports will represent their growth, which suggests they MAY be on track to being able to make up any difference when they finish), there is another, much worse, possibility. This is when a country is simply unable to match its imports with exports and is thus falling behind into debt... a very, very bad dilemma for any country.

Have a good day,

~Troy

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