unit 30: trade deficits and surpluses

trade surplus

is when the value of goods a country exports is more than the value of goods its imports

trade deficit

is when the value of goods a country imports is more than the value of goods its exports

balanced

they are balaced by payments that make up the difference

• a country with a current account surplus can be use the extra money to invest abroad or put it in its foreign currency resevers

• a country with a current account deficit has to look abroad for loans or investment or be forced to dip into its own resevers to pay the excessive imports

measures

• merchandise trade balance: it looks only at tangible goods

• the current account: includes a country’s exports and imports, in addition to its tangible trade

• the capital account: includes all payments and transfer of funds, the balance trade deficits and surpluses

• the balance of payments: includes all payments, the goods, the services, all transfer of funds that cross international borders. it should add up to zero at the end of account period