Question

Suppose a U.S. resident buys a car from a car maker in Japan. This transaction will:

have a negative effect on Japan’s balance of trade in merchandise.

have a negative effect on the U.S. balance of trade in merchandise.

have a positive effect on the U.S. balance of trade in merchandise.

bring money into the United States.

have no effect on Japan’s balance of trade in merchandise.

Answer 1

The balance of trade shows the transactions in merchandise of the country with the rest of the world. The balance of trade include the exports and imports of the country, if the exports are greater than the imports there is a favourable balance of trade. And if the imports are greater than the exports the balance of trade is unfavourable.

The given transaction will have a negative effect on the balance of trade merchandise, this is the imports of the U.S and exports of the Japan. So it will have positive effect on the Japan's balance of trade.

Ans: have a negative effect on the U.S. balance of trade in merchandise.