IGCSE/ A-Level Revision Questions

A trade surplus occurs when a country's exports exceed its imports. There are both potential advantages and disadvantages associated with this.

Advantages of a Trade Surplus	Disadvantages of a Trade Surplus
Economic Growth: A trade surplus contributes to economic growth by increasing national income and employment. Increased National Savings: A trade surplus leads to increased national savings, as the country is earning more from exports than it is spending on imports. Currency Appreciation: A trade surplus can lead to an appreciation of the domestic currency, making imports cheaper.	Reduced Domestic Demand: A trade surplus can reduce domestic demand, as more resources are allocated to export industries. Potential for Protectionism: A large trade surplus can lead to trade tensions with other countries, potentially resulting in protectionist measures. Dependence on Export Markets: A country heavily reliant on exports is vulnerable to fluctuations in global demand.

Economics – International trade and globalisation - Current account of the balance of payments | e-Consult