Question

If imports exceed exports, is it a trade deficit or a

trade surplus? What about if exports exceed imports?

Short answer

A good Trade balance is important for economy.

Step-by-step solution

Step 1. Imports and Exports

Imports: Outflow of funds, from a country. In simple language it means transaction made to seller who resides outside country. it means inflow of goods.

Exports: Inflow of funds from other country. It means transaction made by buyer outside the country. It is outflow of goods.

Step 2. Trade of Balance

Balance of trade is also known by other names like commercial balance or net exports , which means difference of exports of a country from imports of country in terms of money. There can be two types of result. The outcomes are explained below:

Step 3. When imports exceed exports

This type of situation where imports exceed exports depict trade deficit. It is when balance of trade shows negative balance. here purchase of foreign made goods is more than sale of domestic produced goods.

Step 4. When exports exceed imports

This type of situation where exports exceed imports depict trade surplus. It is when balance of trade shows positive balance. here purchase of foreign made goods is less than sale of domestic produced goods.