balance of trade

Examples of balance of trade in the following topics:

• 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.

• Balance of Trade

  • The balance of trade 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.
  • 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:

• 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.
  • In export-led growth (such as oil and early industrial goods), the balance of trade will improve during an economic expansion.
  • Explain the relationship between the trade balance of a nation and its economic well-being

• 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.
  • Whenever a country receives funds from a foreign source, a credit is recorded on the balance of payments.
  • 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 balancing item is simply an amount that accounts for any statistical errors and ensures that the total balance of payments is zero.

• The Common Market of the Southern Cone (MERCOSUR)

  • The purpose of Mercosur is to promote free trade and the fluid movement of goods, people, and currency.
  • Intra-Mercosur merchandise trade (excluding Venezuela) grew from USD 10 billion at the inception of the trade bloc in 1991, to $88 billion in 2010; Brazil and Argentina accounted for 43% of this total.
  • The trade balance within the bloc has historically been tilted toward Brazil, which recorded an intra-Mercosur balance of over $5 billion in 2010.
  • Trade within Mercosur amounted to only 16% of the four countries' total merchandise trade in 2010, and trade with the European Union (20%), China (14%), and the United States (11%) was of comparable importance.
  • Merchandise trade with the rest of the world in 2010 resulted in a surplus for Mercosur of nearly $7 billion; trade in services, however, was in deficit by over $28 billion.

• 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.
  • In your answer, include the actions of the central bank.

• 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.
  • The balance of payments model holds that foreign exchange rates are at an equilibrium level if they produce a stable current account balance.
  • After an intermediate period, imports will be forced down and exports will rise, thus stabilizing the trade balance and bringing the currency towards equilibrium.
  • Like purchasing power parity, the balance of payments model focuses largely on tangible goods and services, ignoring the increasing role of global capital flows .
  • 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.

• Introduction to Foreign Trade and Global Economic Policies

  • But since the Great Depression of the 1930s and World War II, the country generally has sought to reduce trade barriers and coordinate the world economic system.
  • What's more, oil price shocks, worldwide recession, and increases in the foreign exchange value of the dollar all combined during the 1970s to hurt the U.S. trade balance.
  • On top of that, the end of the Cold War saw Americans impose a number of trade sanctions against nations that it believed were violating acceptable norms of behavior concerning human rights, terrorism, narcotics trafficking, and the development of weapons of mass destruction.
  • Still, at the end of the 1990s, the future direction of U.S. trade policy was uncertain.
  • Officially, the nation remained committed to free trade as it pursued a new round of multilateral trade negotiations; worked to develop regional trade liberalization agreements involving Europe, Latin America, and Asia; and sought to resolve bilateral trade disputes with various other nations.

• 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.
  • 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.
  • John Maynard Keynes founded the Keynesian school, which promotes balanced governmental budgets over the course of the business cycle as opposed to annual balanced budgets.

• Trade-Off Consideration

  • Trade-off considerations are important because they take into account the cost and benefits of raising capital through debt or equity.
  • The trade-off theory of capital structure refers to the idea that a company chooses how much debt finance and how much equity finance to use by balancing the costs and benefits.
  • As more capital is raised and marginal costs increase, the firm must find a fine balance in whether it uses debt or equity after internal financing when raising new capital.
  • Trade-off considerations are important factors in deciding appropriate capital structure for a firm since they weigh the cost and benefits of extra capital through debt vs. equity.
  • Describe the balancing act between debt and equity for a company as described by the "trade-off" theory