What is the most likely effect of a surplus of a trade good?
Supply decreases.
Demand decreases.
Scarcity increases.
Demand increases.
Answers
A trade surplus can create employment and economic growth, but may also lead to higher prices and interest rates within an economy. A country's trade balance can also influence the value of its currency in the global markets, as it allows a country to have control of the majority of its currency through trade.
Answer: Eventually Supply decreases. but readon.
All four phenomenon are integral part of trade surplus game! and happens in reverse order of their listing here is phases.
Explanation:
phase 1: TS brings Volumes and Volumes brings Economic scales. Economy of scale brings Competitiveness and hence Demand Increases as well as Foreingn currency reserves
phase 2. volumes brings production , production consumes RMs faster so supply of RMs is Scarce. Scarcity increases as well as Factor Cost increases during phase 2
phase 3 Excess supply in phase 2 has started created issues of inflation locally , inventories at importer, price expectation of importer . This leads to negotiations and delay in remittances. This phase of Negotaitions leads to Demand hold back and Demand Decreases and Uncertainty prevails for future triggering severe negotations
phase 4 : War of trade : Parlays are unsettled . Price , payment and Volumes are all 3 in questions . Eventually unsure of the result , Parties back off , Supply decreases.