What is the balance of trade?
A nation’s balance of trade is exports minus imports
- A nation that exports more than imports will result in a trade surplus
- And oppositely, a nation that imports more than exports will have a trade deficit
- Multiple causes of a nation being in a trade deficit
- Exports may be of inferior quality
- A nation’s currency may be overpriced which makes the imports cheaper
- The country may not have many products they can export
- The country may have higher incomes than the partner it is trading with
- Poorer nations may not be able to afford richer nation’s products
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