A country that experiences a large deficit in the merchandise trade account should always aim at eliminating this trade deficit by adopting strict foreign trade policies.

Question

Quizplus · Accepted Answer

While adopting strict foreign trade policies may help in reducing the trade deficit, it may also lead to negative consequences such as retaliation from trading partners, reduced access to foreign markets, and increased prices for domestic consumers. There are multiple factors that need to be considered when addressing a trade deficit, including exchange rate policies, domestic production capabilities, and macroeconomic policies. Simply adopting strict foreign trade policies is not always the most effective or feasible solution.

A Country That Experiences a Large Deficit in the Merchandise