balance of trade deficit

(noun)

A situation in which a country imports more manufactured products than it exports.

Related Terms

Examples of balance of trade deficit in the following topics:

  • Balance of Trade

    • Suppose the USA imported $1 billion worth of goods and services in 2008 and exported $750 million dollars worth of goods and services, then its trade deficit would be $1 billion minus $750 million, which equals a trade deficit of $250 million.
    • A positive balance is known as a "trade surplus," if it consists of exporting more than is imported; a negative balance is referred to as a "trade deficit" or, informally, a "trade gap."
    • The balance of trade is sometimes divided into a goods and a services balance.
    • Measuring the balance of trade can be problematic because of problems with recording and collecting data.
    • Factors that can affect the balance of trade include:

  • Absolute Advantage and the Balance of Trade

    • Absolute advantage and balance of trade are two important aspects of international trade that affect countries and organizations.
    • Absolute advantage and balance of trade are two important aspects of international trade that affect countries and organizations .
    • The balance of trade (or net exports, sometimes symbolized as NX) is the difference between the monetary value of exports and imports in an economy over a certain period.
    • A positive balance is known as a trade surplus if it consists of exporting more than is imported; a negative balance is referred to as a trade deficit or, informally, a trade gap.
    • The balance of trade is sometimes divided into a goods and a services balance.

  • The Balance of Trade

    • The balance of trade is the difference between the monetary value of exports and imports of output in an economy over a certain period.
    • The balance of trade is the difference between the monetary value of exports and imports of output in an economy over a certain period, measured in the currency of that economy.
    • A positive balance is known as a trade surplus if it consists of exporting more than is imported; a negative balance is referred to as a trade deficit or, informally, a trade gap.
    • Thus, budget deficits and trade deficits go hand-in-hand .
    • Explain the relationship between the trade balance of a nation and its economic well-being

  • Financing Balance-of-Payments Deficits and Surpluses

    • Strategy 1: If a country has a balance-of-payments deficit, it has an excess supply of currency on the foreign exchange markets.
    • As a country removes its currency from the international markets, its balance-of-payments deficit falls.
    • Unfortunately, the trade deficit initially worsens before improving.
    • For instance, a country is experiencing a balance-of-payments deficit.
    • A country can have difficulties financing a balance-of-payments deficit for all exchange rate regimes.

  • Arguments for and Against Balancing the Budget

    • Balanced budgets, and the associated topic of budget deficits, are a contentious point within both academic economics and politics.
    • There is neither a budget deficit nor a budget surplus; in other words, "the accounts balance. " More generally, it refers to a budget with no deficit, but possibly with a surplus.
    • Balanced budgets, and the associated topic of budget deficits, are a contentious point within academic economics and within politics.
    • In the US, every state other than Vermont has a version of a balanced budget amendment, which prohibits some deficits.
    • By balancing deficits in recessions and surpluses in growth, Keynesians believe that the government can obtain the benefits of a balanced budget without facing the risks of making recessions worse due to spending and revenue limitations.

  • Chapter Questions

    • Please define the following terms: current account, trade balance, financial account, and official settlement balance.
    • Why does a statistical discrepancy occur in the balance-of-payments accounts?
    • If a country has a fixed rate regime and experiences a balance-of-payments deficit, please explain how the country must maintain this exchange rate.
    • If a country has a managed float exchange rate regime and experiences a balance-of-payments surplus, please explain how the country must maintain this exchange rate.
    • Many foreign investors are worried over the U.S. government's large trillion-dollar deficits, and the U.S. economy is plagued by massive trade deficits.

  • Finding an Equilibrium Exchange Rate

    • Countries have a vested interest in the exchange rate of their currency to their trading partner's currency because it affects trade flows.
    • This leads to a trade deficit, decreased production, and unemployment.
    • The balance of payments model holds that foreign exchange rates are at an equilibrium level if they produce a stable current account balance.
    • A nation with a trade deficit will experience a reduction in its foreign exchange reserves, which ultimately lowers, or depreciates, the value of its currency.
    • The flows from transactions involving financial assets go into the capital account item of the balance of payments, thus balancing the deficit in the current account.

  • The Balance of Payments

    • The balance of payments (BOP) is a record of all monetary transactions between a country and the rest of the world.
    • The balance of payments (BOP) is a record of all monetary transactions between a country and the rest of the world.
    • For example, if a country is importing more than it exports, its trade balance will be in deficit, but the shortfall will have to be counterbalanced in other ways – such as by funds earned from its foreign investments, by running down central bank reserves, or by receiving loans from other countries .
    • It includes the balance of trade (net earnings on exports minus payments for imports), factor income (earnings on foreign investments minus payments made to foreign investors), and cash transfers.
    • The chart shows the current account deficit of the U.S., both in dollars and as a percent of GDP.

  • The U.S. Trade Deficit

    • At the end of the 20th century, a growing trade deficit contributed to American ambivalence about trade liberalization.
    • An even bigger factor leading to the ballooning U.S. trade deficit, however, was a sharp rise in the value of the dollar.
    • By 1987, the American trade deficit had swelled to $153,300 million.
    • But the American trade deficit swelled again in the late 1990s.
    • American officials viewed the trade balance with mixed feelings.

  • Balance of Payments

    • Balance of payments (BOP) accounts are an accounting record of all monetary transactions between a country and the rest of the world.
    • When all components of the BOP accounts are included, they must sum to zero with no overall surplus or deficit.
    • For example, if a country is importing more than it exports, its trade balance will be in deficit, but the shortfall will have to be counter-balanced in other ways – such as by funds earned from its foreign investments, by running down central bank reserves, or by receiving loans from other countries.
    • There is said to be a balance of payments deficit (the balance of payments is said to be negative) if the former are less than the latter.
    • Then the net change per year in the central bank's foreign exchange reserves is sometimes called the balance of payments surplus or deficit.