Problem 22 If imports exceed exports, is it... [FREE SOLUTION]

Chapter 10: 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

A trade deficit occurs when imports exceed exports, meaning the country is purchasing more goods and services from other countries than it is selling. Conversely, a trade surplus occurs when exports exceed imports, indicating that the country is selling more goods and services to other countries than it is buying.

Step by step solution

Definition of Trade Deficit and Trade Surplus

A country has a trade deficit when its imports (goods and services bought from other countries) exceed its exports (goods and services sold to other countries). This means that the country is purchasing more goods and services from other countries than it is selling. On the other hand, a country has a trade surplus when its exports exceed its imports. This means that the country is selling more goods and services to other countries than it is buying.

Trade Deficit: Imports > Exports

If imports exceed exports, it is considered a trade deficit. In this situation, the country is importing more goods and services than it is exporting, which can, in some cases, lead to a negative impact on the country's economy.

Trade Surplus: Exports > Imports

If exports exceed imports, it is considered a trade surplus. In this situation, the country is exporting more goods and services than it is importing, which can potentially lead to a positive impact on the country's economy.