Evaluating Trade Deficits

The video tutorial explores trade deficits, focusing on the UK's experience and the broader implications of running a trade deficit. It discusses the sustainability of deficits, using Norway's investment in oil exploration as a case study. The tutorial emphasizes evaluating the reasons behind a deficit and its long-term effects on the economy, highlighting that not all deficits are detrimental if they lead to productive investments.

What is a trade deficit?

• When a country's exports and imports are equal

• When a country has no trade with other countries

• When a country's exports exceed its imports

• When a country's imports exceed its exports

How does a growing trade deficit affect a country's competitiveness?

• It makes the country more self-sufficient

• It has no effect on competitiveness

• It increases competitiveness

• It reduces competitiveness

What is one argument against globalization in terms of trade?

• It reduces trade deficits

• It makes countries more competitive

• It can contribute to a current account deficit

• It leads to a current account surplus

Why might a trade deficit be considered beneficial?

• It always indicates a strong economy

• It can be beneficial if it leads to productive investments

• It reduces the need for foreign borrowing

• It always improves the standard of living

What is a key factor in determining the sustainability of a trade deficit?

• The country's climate

• The cause of the deficit

• The country's population

• The size of the deficit

What was Norway's reason for running a large current account deficit in the 1970s?

• To finance oil exploration

• To improve agricultural output

• To reduce national debt

• To increase consumer spending

What can make a trade deficit unsustainable in the long term?

• A surplus in the financial account

• A decrease in import spending

• Continuous borrowing leading to high debt

• High levels of foreign investment