When does a country have a positive balance of trade?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → If the value of exports is more than the value of imports.
Balance of trade compares what a country earns by selling goods and services abroad (exports) with what it spends on buying them (imports).
Option (1) If the value of imports traded is more than the value of a country’s exports. — Incorrect. This is a negative or unfavourable balance of trade.
Option (2) If the value of exports is more than the value of imports. — Correct. The country earns more than it spends, so it has a positive or favourable balance of trade.
Option (3) If the value of exports is equal to the value of imports. — Incorrect. Earnings and spending cancel out, so the balance is neither positive nor negative.
Option (4) If the country only imports goods. — Incorrect. Such a country only spends and earns nothing from exports, so its balance is negative.
NCERT (2026-27): “Balance of Trade … Balance of trade records the volume of goods and services imported as well as exported by a country to other countries. If the value of imports is more than the value of a country’s exports, the country has negative or unfavourable balance of trade. If the value of exports is more than the value of imports, then the country has a positive or favourable balance of trade.” |