The trade balance is the difference between a country's exports and imports of goods (merchandise). Therefore, the correct formula for the trade balance is merchandise exports minus merchandise imports (B). Options A, C, and E are incorrect because they either include services or capital account transactions, which are not part of the trade balance. Option D refers to the financial account, which is unrelated to the trade balance.

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The Trade Balance Is

Question 17

Multiple Choice

The trade balance is

A) the services balance plus the current account balance plus the capital account balance
B) merchandise exports minus merchandise imports
C) the current account balance plus the capital account balance
D) foreign purchases of domestic assets minus domestic purchases of foreign assets
E) the services balance plus the capital account balance

Correct Answer: