Correcting Trade Deficits and Policies to Address Them

The video explores trade deficits, their historical context, and impacts on the UK economy. It discusses both positive aspects, such as improved quality of life and productivity, and challenges like rising debt and economic constraints. Solutions to trade deficits include enhancing competitiveness, reducing expenditure, and encouraging exports. The video also covers the role of protectionism and the EU's influence on trade policies.

What is a trade deficit?

• When a country's GDP is lower than its exports

• When a country's GDP is higher than its imports

• When a country imports more than it exports

• When a country exports more than it imports

How did the Big Bang in 1986 affect the UK's trade deficit?

• It made it easier to fund trade deficits

• It had no impact on the trade deficit

• It eliminated the trade deficit

• It reduced the trade deficit significantly

Which of the following is a positive impact of trade deficits?

• Reduced economic growth

• Decreased quality of life

• Increased borrowing costs

• Improved productive efficiency

What is a major risk of a recurring trade deficit?

• Decreasing levels of debt

• Improving economic stability

• Increasing levels of investment

• Rising levels of consumer borrowing

What is a simple solution to correcting trade deficits?

• Increase imports and decrease exports

• Become more competitive to import less and export more

• Increase government spending

• Decrease productivity

Which strategy involves reducing expenditure to correct trade deficits?

• Enhancing productivity

• Increasing imports

• Encouraging exports

• Expenditure reducing behavior

What is a potential downside of productivity-enhancing policies?

• They are quick to implement

• They can be very slow to show results

• They decrease the productive capacity

• They increase the trade deficit

Why is protectionism challenging for the UK?

• It has no impact on trade deficits

• It is too expensive to implement

• It must be conducted collectively within the EU

• It is not allowed by the World Trade Organization

What is a risk associated with implementing protectionist policies?

• Decreased trade deficits

• Increased free trade

• Improved domestic industry competitiveness

• Risk of retaliation from other countries

What role does the World Trade Organization play in protectionism?

• It encourages protectionist policies

• It supports tariffs and quotas

• It prohibits many protectionist measures

• It has no influence on trade policies