Question

How does an increase in foreign trade benefit the country?

• A. An increase in exports increases the foreign currency reserves.
• B. An increase in imports increases the foreign currency reserves.
• C. An increase in exports decreases the foreign currency reserves.
• D. An increase in imports decreases the foreign currency reserves.

Answer 1

The correct option is A An increase in exports increases the foreign currency reserves.

The increase in foreign trade refers to increase in imports and exports of a country. When a country's exports are greater than its imports, the foreign currency reserve increases. But if imports are greater than imports, the foreign currency reserve reduces.