Trade Balance

(noun)

The difference between the monetary value of exports and imports in an economy over a certain period of time.

Related Terms

Examples of Trade Balance in the following topics:

  • Balance of Trade

    • 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:
    • In addition, the trade balance is likely to differ across the business cycle.

  • 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.
    • 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 addition, the trade balance is likely to differ across the business cycle.
    • 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

  • 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.

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

  • 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.
    • After an intermediate period, imports will be forced down and exports will rise, thus stabilizing the trade balance and bringing the currency towards equilibrium.
    • 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

    • 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.
    • Mounting trade deficits reduced political support in the U.S.
    • Congress for trade liberalization in the 1980s and 1990s.
    • Despite these setbacks to free trade, the United States continued to advance trade liberalization in international negotiations in the 1990s, ratifying a North American Free Trade Agreement (NAFTA), completing the so-called Uruguay Round of multilateral trade negotiations, and joining in multilateral agreements that established international rules for protecting intellectual property and for trade in financial and basic telecommunications services.
    • 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.

  • The Common Market of the Southern Cone (MERCOSUR)

    • The program also proposed the Gaucho as a currency for regional trade.
    • 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.
    • It is the fourth-largest trading bloc after the European Union.

  • Arguments for and Against Balancing the Budget

    • A balanced budget, particularly a government budget, is a budget with revenues equal to expenditures.
    • A cyclically balanced budget is a budget that is not necessarily balanced year-to-year, but is balanced over the economic cycle, running a surplus in boom years and running a deficit in lean years, with these offsetting over time .
    • The mainstream economic view is that having a balanced budget in every year is not desirable.
    • 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.
    • Describe arguments against maintaining a balanced budget in the United States

  • 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.
    • Therefore, trade off considerations change from firm to firm as they impact capital structure.
    • Describe the balancing act between debt and equity for a company as described by the "trade-off" theory