11-26-2014, 09:29 PM
Management of Financial Institutions MGT604 Assigment No-1 Fall 2014 2nd December is Last Date
Trade deficit embodies the situation in which imports of a country exceed its exports. It is an economic measure that represents the negative balance of trade (BOT). Economists have different viewpoints about trade deficit. Some have views that trade deficit favors the economy because GDP (Gross Domestic Product) and employment opportunities increases due to increase in country’s imports; on the other hand some of the experts criticize it strongly that trade deficit is not a good situation as it will hamper the overall economic position of the country especially in case of developing countries like Pakistan.
On the basis of analysis by experts, trade deficit is one of the major external threats for economic growth of Pakistan. It is continuously facing trade deficit and its percentage increase is quite adverse over the years. So, in developing economies, the major responsibilities lie with the policy makers as they have to consider different macroeconomic variables and need to critically evaluate them in order to improve the worse condition of trade deficit.
Requirement:
Being a policy maker; you are required to:
• Discuss the relationship of “Exchange Rate & Foreign Direct Investment” with trade deficit.
• Describe how to improve the negative balance of trade in Pakistan. Give logical reasons to support your suggestions.