What does a nation develop when its imports are greater than its exports?
The trade balance is the difference between the value of the goods that a country (or another geographic or economic area such as the European Union (EU) or the euro area) exports and the value of the goods that it imports. Show If exports exceed imports then the country has a trade surplus and the trade balance is said to be positive. If imports exceed exports, the country or area has a trade deficit and its trade balance is said to be negative. However, the words ‘positive’ and ‘negative’ have only a numerical meaning and do not necessarily reflect whether the economy of a country or area is performing well or not. A trade deficit may for instance reflect an increase in domestic demand for goods destined for consumption and/or production. The total trade balance, including all goods exported and imported, is one of the major components of the balance of payments. A big surplus or deficit for a single product or product category can show a particular national competitive advantage or disadvantage in the world market for goods.
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Définitions Dernière mise à jour le :13/10/2016 Définition
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Definitions and BasicsBalance of Payments, from the Concise Encyclopedia of Economics
Balance of Trade, from Britannica.com.
In the News and ExamplesPopular myth: Aren’t imports bad? Aren’t exports good? Isn’t a trade deficit a bad thing? The very word “deficit” sounds bad! Economic reality: An excess of imports over exports merely sends dollar bills overseas while bringing real goods and services into the country for immediate use. If foreigners want to hold onto those dollars, while we get to put their goods to immediate use benefiting our consumers and creating new investment for our industries, then we get an even better deal! Prohibiting trade severely limits what you can accomplish. Daniel B. Klein and Donald J. Boudreaux, The Trade Deficit: Defective Language, Deficient Thinking. Econlib, June 5, 2017. Notice that if imports exceed exports, as they have done for decades in the United States, then, on net, more dollars leave the United States by Americans’ purchases of imports than come in by Americans’ sales of exports. Such a situation is termed a current-account deficit, or “trade deficit.” But the terminology could just as well be formulated the other way around, in a framework of husbanding stuff. Then, under the same condition of imports exceeding exports, the focus is on the stuff that, on net, is flowing into the United States. Now we view the exact same world but see a surplus. Don Boudreaux on the Economics of “Buy Local”. EconTalk podcast episode, April 16, 2007.
Trade Imbalances, at Marginal Revolution University Why not just buy American? Foreign Trade, or The Wedding Gown, by Jane Haldimand Marcet in John Hopkins’s Notions on Political Economy. 1831.
A Little History: Primary Sources and ReferencesDavid Hume on the Balance of Trade, at Marginal Revolution University Douglas A. Irwin, A Brief History of International Trade Policy, Econlib, November 2001.
The Balance of Trade, by Frédéric Bastiat. Chapter 6 in Economic Sophisms, first published 1845 in France.
Mercantilism, from the Concise Encyclopedia of Economics
Advanced ResourcesNations Gain When They Trade, But What About Me? EconTalk podcast Extra. March 15, 2016. By the end of the conversation, Roberts still doesn’t seem convinced that China is behind the long-term impact on communities and employment. He says that instead the challenge may be that “we’re [the US labor force] not so good at adapting, perhaps, as we once were, for all kinds of reasons.” What are some of those reasons? Is Roberts’s argument plausible? Studies in the Theory of International Trade, by Jacob Viner. The most pervasive feature of the English mercantilist literature was the doctrine that it was vitally important for England that it should have an excess of exports over imports, usually because that was for a country with no gold or silver mines the only way to increase its stock of the precious metals. The doctrine is of early origin, and some of the mercantilists, in the earlier period when it was still customary to scatter miscellaneous tags of classical wisdom through one’s discourse, succeeded in finding Latin quotations which seemed to expound it. Charles L. Hooper, Mercantilism Lives, at Econlib. April 4, 2011. Whether they realize it or not, many modern politicians of various stripes are mercantilists. Just watch the news and you’ll see those in our government and in the media expressing predominantly mercantilist views: Our trading partners’ currencies are too cheap and the trade deficit is too high—together, these two factors reduce domestic employment. Related TopicsBarriers to Trade Benefits of Trade and Comparative Advantage Trade, Exchange, and Interdependence International Capital Flows GDP Money Foreign Currency Markets and Exchange Rates Budget Deficits and Public Debt What happens when imports are greater than exports?If exports exceed imports then the country has a trade surplus and the trade balance is said to be positive. If imports exceed exports, the country or area has a trade deficit and its trade balance is said to be negative.
What does it mean when a country has more imports than exports?A country that imports more goods and services than it exports in terms of value has a trade deficit or a negative trade balance. Conversely, a country that exports more goods and services than it imports has a trade surplus or a positive trade balance.
What happens when a country increases its imports?A rising level of imports and a growing trade deficit can have a negative effect on a country's exchange rate. A weaker domestic currency stimulates exports and makes imports more expensive; conversely, a strong domestic currency hampers exports and makes imports cheaper.
What happens to GDP when imports are greater than exports?If domestic consumers spend more on foreign products than domestic producers sell to foreign consumers—a trade deficit—then GDP decreases.
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