7. A trade deficit occurs when a country:
A. Exports more than it imports
B. Imports more than it exports
C. Has a balanced trade
D. Only exports services
Answer (1)
The answer is letter B. Imports more than it exportsA trade deficit happens when a country buys more goods from other countries than it sells. For example, if the Philippines imports too much rice, fuel, or electronics but doesn’t export enough in return, it will have a trade deficit.This affects the economy because more dollars go out than come in. A constant trade deficit can weaken the peso and make imports more expensive, leading to inflation.
