ii. What are the components that make up the balance of trade and balance of payments? iii. Do the international trade benefits outweigh domestic trade? Justify.

ii. The components that make up the balance of trade include exports, imports, trade surplus, and trade deficit. The balance of payments, on the other hand, includes the balance of trade, foreign direct investment, foreign aid, and other financial transactions between a country and the rest of the world.

iii. The benefits of international trade can outweigh domestic trade in many ways. International trade allows countries to specialize in producing goods and services that they have a comparative advantage in, leading to increased efficiency and lower prices for consumers. It also allows for a greater variety of goods and services to be available to consumers, leading to higher standards of living. Additionally, international trade can create jobs, promote economic growth, and foster innovation.

However, it is important to note that international trade can also have negative effects, such as job displacement in certain industries and potential exploitation of labor in developing countries. It is crucial for countries to have policies in place to mitigate these negative effects and ensure that the benefits of international trade are distributed fairly among all members of society. Ultimately, the benefits of international trade can outweigh domestic trade if managed effectively and in a way that promotes sustainable and inclusive growth.

ii. Components of Balance of Trade and Balance of Payments:

Balance of Trade (BOT)
- Exports (goods and services sold to other countries)
- Imports (goods and services purchased from other countries)

Balance of Payments (BOP)
- Current Account:
- BOT
- Net income (earnings from investments abroad)
- Net transfers (remittances, aid)
- Capital Account:
- Foreign direct investment
- Portfolio investment
- Official reserves
- Financial Account:
- Changes in foreign exchange reserves
- Foreign currency deposits
- Loans

iii. International vs. Domestic Trade Benefits:

The benefits of international trade often outweigh those of domestic trade for the following reasons:

- Increased Market Size: International trade allows businesses to reach a wider customer base, resulting in expanded revenue and profit potential.
- Access to New Markets: It enables businesses to tap into markets with different consumer preferences, unmet needs, and economic circumstances.
- Economies of Scale: By exporting to multiple countries, businesses can produce goods and services in larger quantities, leading to lower unit costs and higher profits.
- Diversification: International trade reduces the reliance on a single domestic market, which can mitigate risks associated with economic downturns or fluctuations in demand.
- Innovation and Technology Transfer: Exposure to global markets fosters innovation as businesses strive to compete with international counterparts. It also facilitates the exchange of technologies and best practices.
- Economic Growth and Development: International trade promotes economic growth by increasing employment, boosting exports, and attracting foreign investment. It can also enhance living standards by providing access to cheaper goods and services.
- Improved Competitiveness: Participating in international trade forces businesses to become more efficient, improve product quality, and innovate to compete with global rivals.