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Balance of Trade; Trade Deficit and Trade Surplus definitions

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  • Balance of Trade
    Difference between value of goods and services sold abroad and those bought from other countries; reflects net exports.
  • Trade Surplus
    Situation where goods and services sold abroad exceed those purchased from other countries, indicating net positive exports.
  • Trade Deficit
    Condition where goods and services bought from other countries surpass those sold abroad, resulting in negative net exports.
  • Net Exports
    Total value of goods and services sold abroad minus those bought from other countries; can be positive or negative.
  • Open Economy
    System where a country exchanges goods and services with other nations, allowing both imports and exports.
  • Closed Economy
    System where a country does not engage in international exchange of goods and services; no imports or exports.
  • Exports
    Goods and services produced domestically and sold to buyers in other countries, generating income from abroad.
  • Imports
    Goods and services produced abroad and purchased by domestic consumers, reflecting foreign production in local markets.
  • Comparative Advantage
    Ability to produce a good or service at a lower opportunity cost than others, driving international trade patterns.
  • Savings
    Portion of current output not used for immediate consumption, potentially available for future investment or spending.
  • Investment
    Allocation of current resources to activities or assets that increase future productive capacity or output.
  • Economic Investment
    Spending on assets like factories or technology aimed at boosting future production, distinct from financial investments.
  • Financial Investment
    Acquisition of assets such as stocks, bonds, or mutual funds, typically for earning returns rather than increasing output.
  • Balanced Trade
    State where the value of goods and services sold abroad equals those bought from other countries; net exports are zero.