ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A country that imports more goods and services than it exports in terms of value has a trade deficit or a negative trade balance. Conversely, a country that exports more goods and services than it imports has a trade surplus or a positive trade balance.

Detailed explanation-2: -If the exports of a country exceed its imports, the country is said to have a favourable balance of trade, or a trade surplus. Conversely, if the imports exceed exports, an unfavourable balance of trade, or a trade deficit, exists.

Detailed explanation-3: -Exporting refers to the selling of goods and services from the home country to a foreign nation. Whereas, importing refers to the purchase of foreign products and bringing them into one’s home country.

Detailed explanation-4: -A BOP statement of a country indicates whether the country has a surplus or a deficit of funds, i.e. when a country’s export is more than its import, its BOP is said to be in surplus. On the other hand, the BOP deficit indicates that its imports are more than its exports.

Detailed explanation-5: -Balance of trade is defined as a nation’s net exports, or its exports minus imports. When exports exceed imports, the nation has a trade surplus, and when imports exceed exports, the nation has a trade deficit. Factor endowments, such as labor, affect the balance of trade by what is produced and by whom.