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Chapter 23: Problem 22

If imports exceed exports, is it a trade deficit or a trade surplus? What about if exports exceed imports?

Short Answer

Expert verified
If imports exceed exports, it is a trade deficit. If exports exceed imports, it is a trade surplus.

Step by step solution

01

Scenario 1: Imports exceed exports

When a country's imports value is higher than its exports value, this situation is known as a trade deficit. The country is spending more on imported goods and services than it is earning from exporting its goods and services.
02

Scenario 2: Exports exceed imports

When a country's exports value is higher than its imports value, this situation is known as a trade surplus. The country is earning more from exporting its goods and services than it is spending on imported goods and services. In conclusion: - If imports exceed exports, it is a trade deficit. - If exports exceed imports, it is a trade surplus.

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Most popular questions from this chapter

Why does a recession cause a trade deficit to increase?

A government official announces a new policy. The country wishes to eliminate its trade deficit, but will strongly encourage financial investment from foreign firms. Explain why such a statement is contradictory.

Describe a scenario in which a trade surplus benefits an economy and one in which a trade surplus is occurring in an economy that performs poorly. What key factor or factors are making the difference in the outcome that results from a trade surplus?

If a country is running a government budget surplus, why is ( \(\mathrm{T}-\mathrm{G}\) ) on the left side of the saving-investment identity?

Occasionally, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Explain why such a statement is economically impossible.
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