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Chapter 10: Q. 32 (page 266)

What is the difference between trade deficits and balance of trade?

Short Answer

Expert verified

Trade deficit is when imports exceed exports.

Balance of trade is the difference between the exports and imports.

Step by step solution

01

Step1. Introduction

Imports refer to the buying of goods/services from the foreign countries.

Exports refer to the selling of goods/services to the foreign countries.

02

Step2. Explanation

Balance of trade refers to the difference between exports and imports. This difference can be negative as well as positive.

A situation of Balance of Trade is Trade Deficit, i.e. when the difference between exports and imports is negative, or in other words when imports exceed exports.

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Most popular questions from this chapter

Does a trade surplus mean an overall inflow of financial capital to an economy, or an overall outflow of financial capital? What about a trade deficit?

Describe a scenario in which a trade surplus benefits an economy and one in which a trade surplus is occurring in an economy that performs poorly. What key factor or factors are making the difference in the outcome that results from a trade surplus?

The GDP for the United States is \(18,036billion and its current account balance is -\)484billion. What percent of GDP is the current account balance?

Many think that the size of a trade deficit is due

to a lack of competitiveness of domestic sectors, such as autos. Explain why this is not true.

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.
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