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Chapter 23: Problem 22

If imports exceed exports, is it a trade deficit or a trade surplus? What about if exports exceed imports?

Short Answer

Expert verified
If imports exceed exports, it is a trade deficit. If exports exceed imports, it is a trade surplus.

Step by step solution

01

Scenario 1: Imports exceed exports

When a country's imports value is higher than its exports value, this situation is known as a trade deficit. The country is spending more on imported goods and services than it is earning from exporting its goods and services.
02

Scenario 2: Exports exceed imports

When a country's exports value is higher than its imports value, this situation is known as a trade surplus. The country is earning more from exporting its goods and services than it is spending on imported goods and services. In conclusion: - If imports exceed exports, it is a trade deficit. - If exports exceed imports, it is a trade surplus.

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Most popular questions from this chapter

What are the two main sides of the national savings and investment identity?

What are the main components of the national savings and investment identity?

Imagine that the U.S. economy finds itself in the following situation: a government budget deficit of \(\$ 100\) billion, total domestic savings of \(\$ 1,500\) billion, and total domestic physical capital investment of \(\$ 1,600\) billion. According to the national saving and investment identity, what will be the current account balance? What will be the current account balance if investment rises by \$50 billion, while the budget deficit and national savings remain the same?

Explain the relationship between a current account deficit or surplus and the flow of funds.

In 2001, the United Kingdom's economy exported goods worth \(£ 192\) billion and services worth another E77 billion. It imported goods worth \(£ 225\) billion and services worth \(£ 66\) billion. Receipts of income from abroad were \(£ 140\) billion while income payments going abroad were \(£ 131\) billion. Government transfers from the United Kingdom to the rest of the world were \(£ 23\) billion, while various U.K government agencies received payments of \(£ 16\) billion from the rest of the world. a. Calculate the U.K. merchandise trade deficit for 2001. b. Calculate the current account balance for 2001 . c. Explain how you decided whether payments on foreign investment and government transfers counted on the positive or the negative side of the current account balance for the United Kingdom in 2001.
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