Define balance of trade. Distinguish between favourable balance of trade and unfavourable balance of trade. (2024)

FAQs

Define balance of trade. Distinguish between favourable balance of trade and unfavourable balance of trade.? ›

If the exports of a country exceed its imports, the country is said to have a favourable balance of trade, or a trade surplus. Conversely, if the imports exceed exports, an unfavourable balance of trade, or a trade deficit, exists.

The balance of trade (BOT), also known as the trade balance, refers to the difference between the monetary value of a country's imports and exports over a given time period. A positive trade balance indicates a trade surplus while a negative trade balance indicates a trade deficit.

This is the difference between the value of exports and imports to a specific country's economic output over a set period of time.

A favorable balance of trade is known as a trade surplus and consists of exporting more than is imported; an unfavorable balance of trade is known as a trade deficit or, informally, a trade gap. When there is an excess of exports over imports, it is called favourable balance of trade.

Balance of Trade = Country's Exports – Country's Imports. For example, suppose the USA imported $1.8 trillion in 2016 but exported $1.2 trillion to other countries. Then, the USA had a trade balance of -$600 billion, or a $600 billion trade deficit.

The difference between the value of imports and the value of exports of a country in a specific period of time is called the balance of trade. When imports are greater than exports, it is known as an unfavourable balance of trade.

A favorable balance of trade, also known as a trade surplus, occurs when a country exports more goods than it imports. This means that the country is earning more from its exports than it is spending on its imports, and it is generally seen as a sign of economic strength.

The balance of trade, or trade balance, represents the difference between a country's exports and imports.

Balance of trade is the difference between the value of a country's exports and the value of its imports; it is the largest component of a country's balance of payments. A trade deficit occurs when a country's imports exceed its exports.

There are three components to the current account – the 'trade balance', 'primary income balance' and 'secondary income balance'. In economic analysis or commentary, most attention is usually given to the trade balance, which records the difference between the value of our exports and imports of goods and services.

How do you tell the difference between favorable and unfavorable? ›

What does favorable and unfavorable mean in accounting? In the field of accounting, variance simply refers to the difference between budgeted and actual figures. Higher revenues and lower expenses are referred to as favorable variances. Lower revenues and higher expenses are referred to as unfavorable variances.

The balance of trade is typically measured as the difference between a country's exports and imports of goods. To calculate the balance of trade, you would subtract the value of a country's imports from the value of its exports.

Balance of Payments is unfavorable when the Payments (debit) of the country is more than its receipts (credit). Meanwhile, when the receipts (credit) are more than the Payments (debit), the BoP is said to be favorable. Disequilibrium in Balance of Payments can be understood as: Favourable BoP.

balance of trade, the difference in value over a period of time between a country's imports and exports of goods and services, usually expressed in the unit of currency of a particular country or economic union (e.g., dollars for the United States, pounds sterling for the United Kingdom, or euros for the European Union ...

Balance: Total cash available to trade, including all closed out profits and losses as well as all deposits and withdrawals applied on your trading account. Equity: Floating Profit and Loss, on top of balance. Margin: Funds required to open a position.

Balanced trade helps prevent abrupt and disruptive changes in exchange rates and trade flows. For example, consider how volatile exchange rates and dependency on foreign countries for goods may cause undue strain on one's economy. Jobs and Domestic Industries: Balanced trade may benefit both jobs and domestic industry.

Balance: Total cash available to trade, including all closed out profits and losses as well as all deposits and withdrawals applied on your trading account. Equity: Floating Profit and Loss, on top of balance. Margin: Funds required to open a position.

Why is a favourable trade balance good? When a country sells more goods than they pay for they are said to have a favourable or positive balance of trade. This can be good since the excess capital brought in from trade can be used to increase the standard of living of the country's citizens.

The Bottom Line

Trade deficits occur when a country imports more goods and services than it exports, resulting in a negative balance of trade. They can affect domestic industries, employment, and economic growth, and are influenced by factors such as exchange rates, trade policies, and global economic conditions.