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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

Imagine that the economy of Germany finds itself in the following situation: the government budget has a surplus of 1% of Germany's GDP; private savings is 20\% of GDP; and physical investment is 18\% of GDP. a. Based on the national saving and investment identity, what is the current account balance? b. If the government budget surplus falls to zero, how will this affect the current account balance?

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

Some economists warn that the persistent trade deficits and a negative current account balance that the United States has run will be a problem in the long run. Do you agree or not? Explain your answer.

Does a trade surplus mean an overall inflow of financial capital to an economy, or an overall outflow of financial capital? What about a trade deficit?

Occasionally, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Is this possible?
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