A balance of trade (trade balance) is the difference between the monetary values of exports and imports of a country's economic output over a given period of time. Trade balance can be positive (favorable) when the value of exports is greater than the value of imports. The positive trade balance is also called trade surplus. On the other hand, if the value of imports is greater than the value of exports, the trade balance indicates trade deficit.
Trade balance affects the Gross Domestic Product (GDP) of a country since net export is a component of the GDP. It also affects the exchange rate of a country's currency.
- How does trade stimulate long term economic growth? Explain.
- Which part of international trade creates more jobs? Is it export or import? Why?
- Is it trade deficit or trade surplus that contributes more to economic growth? Why?
- Why do countries impose trade restrictions on goods and services they import from other countries? What are the pros and cons of trade protectionism?