Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 10: 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
A trade deficit occurs when imports exceed exports, meaning the country is purchasing more goods and services from other countries than it is selling. Conversely, a trade surplus occurs when exports exceed imports, indicating that the country is selling more goods and services to other countries than it is buying.

Step by step solution

01

Definition of Trade Deficit and Trade Surplus

A country has a trade deficit when its imports (goods and services bought from other countries) exceed its exports (goods and services sold to other countries). This means that the country is purchasing more goods and services from other countries than it is selling. On the other hand, a country has a trade surplus when its exports exceed its imports. This means that the country is selling more goods and services to other countries than it is buying.
02

Trade Deficit: Imports > Exports

If imports exceed exports, it is considered a trade deficit. In this situation, the country is importing more goods and services than it is exporting, which can, in some cases, lead to a negative impact on the country's economy.
03

Trade Surplus: Exports > Imports

If exports exceed imports, it is considered a trade surplus. In this situation, the country is exporting more goods and services than it is importing, which can potentially lead to a positive impact on the country's economy.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

If you observed a country with a rapidly growing trade surplus over a period of a year or so, would you be more likely to believe that the country's economy was in a period of recession or of rapid growth? Explain.

If foreign investors buy more U.S. stocks and bonds, how would that show up in the current account balance?

Imagine that the economy of Germany finds itself in the following situation: the government budget has a surplus of \(1 \%\) of Germany's GDP; private savings is \(20 \%\) of \(\mathrm{GDP} ;\) and physical investment is \(18 \%\) of GDP. a. Based on the national saving and investment identity, what is the current account balance? b. If the government budget surplus falls to zero, how will this affect the current account balance?

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

Table 10.7 provides some hypothetical data on macroeconomic accounts for three countries represented by A, B, and C and measured in billions of currency units. In Table \(10.7,\) private household saving is \(\mathrm{SH}\), tax revenue is \(\mathrm{T},\) government spending is \(\mathrm{G},\) and investment spending is I. $$\begin{array}{l|l|l|l}\hline {} & {\text { A }} & {\text { B }} & {\text { C }} \\\\\hline \text { SH } & 700 & 500 & 600 \\\\\hline \text { T } & 00 & 500 & 500 \\\\\hline \text { G } & 600 & 350 & 650 \\\\\hline \text { I } & 800 & 400 & 450 \\\\\hline\end{array}$$ a. Calculate the trade balance and the net inflow of foreign saving for each country. b. State whether each one has a trade surplus or deficit (or balanced trade). c. State whether each is a net lender or borrower internationally and explain.
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free