If Germany exports $100,000 of sauerkraut to Jamaica and purchases $100,000 of Blue Mountain coffee beans from Jamaica, Germany has1. a favorable balance of trade with Jamaica. 2. an overall favorable balance of trade. 3. neither a favorable nor an unfavorable balance of trade with Jamaica. 4. an unfavorable balance of trade with Jamaica. 5. an overall unfavorable balance of trade.

Question

Kathryn Randall

Business

27 October, 12:51

If Germany exports $100,000 of sauerkraut to Jamaica and purchases $100,000 of Blue Mountain coffee beans from Jamaica, Germany has1. a favorable balance of trade with Jamaica. 2. an overall favorable balance of trade. 3. neither a favorable nor an unfavorable balance of trade with Jamaica. 4. an unfavorable balance of trade with Jamaica. 5. an overall unfavorable balance of trade.

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Answers (1)

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Kaiden Mercado · Answer 1

Option 3 is correct.

Explanation:

The reason is that their is no benefits and losses arising from this transaction to either party to trade. The exchange of items will result in exchange of assets between two countries which will be in balance. This transaction neither devalues Germany's currency nor strengthens it. Same is the situation for the Jamaica. If the transaction was favourable for Germany, which means its export in monetary terms exceeds the imports from jamaica. It would had benefited Germany in additional earnings. It's example is just like your family's total income is $10000 per month and your spendings are $10000 per month. In this situation you are neither benefiting nor you are in deficit. Its okay for you to spend upto $10000 but if you exceed that limit, you might face unfavourable circumstances in near future. Thats the reason why countries try to increase their exports from imports.