The correct answer is Both (A) and (R) are false. Explanation & Key Takeaways: • Assertion (A) Balance of trade never shows negative balance or unfavourable balance. • Balance of trade shows a favourable balance when the value of export of goods exceeds the value of imports. • Balance of trade shows an unfavourable balance when the value of imports exceeds the value of exports. • A favourable balance of trade is also known as a trade surplus. • An unfavourable balance of trade is also known as a trade deficit. Thus, the assertion is false. • Reason (R) Export and import of goods and services is known as the balance of trade. • The difference between the value of goods exported and imported is termed the balance of trade. • If the value of exports of goods exceeds the value of imports of goods, the balance of trade is favourable. • If the value of imports of goods exceeds the value of exports of goods, the balance of trade is unfavourable. • The value of import and export of services is not included in the balance of trade. Thus, the reason is false. On the basis of the above analysis, it can be concluded that both the assertion and reason are false.