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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
