If balance of trade is not favourable why it is not a cause of great concern ?
Dear student,
An unfavourable balance of trade (trade deficit) is not always a cause of alarm. It is a cause of worry in only the following situations:
An unfavourable balance of trade (trade deficit) is not always a cause of alarm. It is a cause of worry in only the following situations:
- When the savings are smaller: In such a situation the long-term growth prospects of the country would be hampered.
- When there are simultaneous budget deficits as well. This would exert excessive pressure on the country's stock of capital and investment and a situation of debt trap.