Consider the following statements Balance of Trade refers to the difference between the value of a c...........

Economic Affairs Foreign Trade - Trends and Policy

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Consider the following statements:

Balance of Trade refers to the difference between the value of a country's exports and the value of its imports.
A positive Balance of Trade indicates that a country exports more than it imports, and it is referred to as a trade surplus.
Current Account Deficit (CAD) arises when a country's total imports of goods, services, and transfers is greater than its total exports.
A high CAD is always detrimental for the country's economy and reflects poor economic management.

How many of the above statements is/are correct?

Only One

Only Two

Only Three

All Four

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Explanation:

Statement 4 is Incorrect. While a high CAD might indicate a country is living beyond its means, it isn't necessarily always detrimental.

A current account deficit indicates that a country is importing more than it is exporting. Emerging economies often run surpluses, and developed countries tend to run deficits. A current account deficit is not always detrimental to a nation's economy—external debt may be used to finance lucrative investments.