balance of trade

Examples of balance of trade in the following topics:

• The Balance of Trade

  • The balance of trade is the difference between the monetary value of exports and imports of output in an economy over a certain period.
  • The balance of trade is the difference between the monetary value of exports and imports of output in an economy over a certain period, measured in the currency of that economy.
  • A positive balance is known as a trade surplus if it consists of exporting more than is imported; a negative balance is referred to as a trade deficit or, informally, a trade gap.
  • In export-led growth (such as oil and early industrial goods), the balance of trade will improve during an economic expansion.
  • Explain the relationship between the trade balance of a nation and its economic well-being

• The Importance of Trade

  • International trade is an integral part of the modern world economy.
  • trade through markets from sale of one type of output for other, more highly valued goods.
  • Established in 1946 to rebuild the international economic system after World War II, the Bretton Woods Conference set up regulations for production of their individual currencies to maintain fixed exchange rates between countries with the aim of more easily facilitating international trade.This was the foundation of the U.S. vision of postwar world free trade, which also involved lowering tariffs and, among other things, maintaining a balance of trade via fixed exchange rates that would be favorable to the capitalist system.
  • Although the world eventually abolished the system of fixed exchange rates, the goal of more open economies and free international trade remained.
  • Discuss the reasons of the U.S. increase in international trade participation after World War II

• The Balance of Payments

  • The balance of payments (BOP) is a record of all monetary transactions between a country and the rest of the world.
  • The balance of payments (BOP) is a record of all monetary transactions between a country and the rest of the world.
  • Whenever a country receives funds from a foreign source, a credit is recorded on the balance of payments.
  • It includes the balance of trade (net earnings on exports minus payments for imports), factor income (earnings on foreign investments minus payments made to foreign investors), and cash transfers.
  • The balancing item is simply an amount that accounts for any statistical errors and ensures that the total balance of payments is zero.

• Exchange Rate Policy Choices

  • A government should consider its economic standing, trade balance, and how it wants to use its policy tools when choosing an exchange rate regime.
  • Flexible exchange rates serve to adjust the balance of trade.
  • When a trade deficit occurs in an economy with a floating exchange rate, there will be increased demand for the foreign (rather than domestic) currency which will increase the price of the foreign currency in terms of the domestic currency.
  • That in turn makes the price of foreign goods less attractive to the domestic market and decreases the trade deficit.
  • Under fixed exchange rates, this automatic re-balancing does not occur.

• Jobs Argument

  • Many policy makers who are proponents of trade protectionism argue that limiting imports will create or save more jobs at home.
  • Many policy makers who are proponents of trade protectionism make the argument that limiting imports will create more jobs at home.
  • It is useful to consider the concept of a trade balance, or net exports, in the context of the jobs argument.
  • The U.S. and China are a great example of opposite sides of the spectrum, where the trade balance is heavy on one side of the spectrum.
  • It is interesting to look at this graph and assess the extremity to which some nations are 'consumer nations' and others are 'producer nations. ' The U.S. and China are a great example of opposite sides of the spectrum, where the trade balance is heavily on one side of the spectrum.

• Finding an Equilibrium Exchange Rate

  • Countries have a vested interest in the exchange rate of their currency to their trading partner's currency because it affects trade flows.
  • The balance of payments model holds that foreign exchange rates are at an equilibrium level if they produce a stable current account balance.
  • After an intermediate period, imports will be forced down and exports will rise, thus stabilizing the trade balance and bringing the currency towards equilibrium.
  • Like purchasing power parity, the balance of payments model focuses largely on tangible goods and services, ignoring the increasing role of global capital flows .
  • The flows from transactions involving financial assets go into the capital account item of the balance of payments, thus balancing the deficit in the current account.

• Reason for a Zero Balance

  • Equilibrium in the market for a country's currency implies that the balance of payments is equal to zero.
  • Trade within a country differs in one important way from trade between countries: unless the two nations share a common currency, any trade requires that countries go through the foreign exchange market to trade currency, in addition to trading goods and services.
  • When a country's balance of payments is equal to zero, there is equilibrium in the market for that country's currency.
  • Because of this, the inflows and outflows of money are equal, creating a balance of payments equal to zero.
  • Discuss the long term equilibrium of a country's balance of payments

• Introduction to Foreign Trade and Global Economic Policies

  • But since the Great Depression of the 1930s and World War II, the country generally has sought to reduce trade barriers and coordinate the world economic system.
  • What's more, oil price shocks, worldwide recession, and increases in the foreign exchange value of the dollar all combined during the 1970s to hurt the U.S. trade balance.
  • On top of that, the end of the Cold War saw Americans impose a number of trade sanctions against nations that it believed were violating acceptable norms of behavior concerning human rights, terrorism, narcotics trafficking, and the development of weapons of mass destruction.
  • Still, at the end of the 1990s, the future direction of U.S. trade policy was uncertain.
  • Officially, the nation remained committed to free trade as it pursued a new round of multilateral trade negotiations; worked to develop regional trade liberalization agreements involving Europe, Latin America, and Asia; and sought to resolve bilateral trade disputes with various other nations.

• Arguments for and Against Balancing the Budget

  • Balanced budgets, and the associated topic of budget deficits, are a contentious point within both academic economics and politics.
  • Balanced budgets, and the associated topic of budget deficits, are a contentious point within academic economics and within politics.
  • In the US, every state other than Vermont has a version of a balanced budget amendment, which prohibits some deficits.
  • By balancing deficits in recessions and surpluses in growth, Keynesians believe that the government can obtain the benefits of a balanced budget without facing the risks of making recessions worse due to spending and revenue limitations.
  • John Maynard Keynes founded the Keynesian school, which promotes balanced governmental budgets over the course of the business cycle as opposed to annual balanced budgets.

• The U.S. Trade Deficit

  • At the end of the 20th century, a growing trade deficit contributed to American ambivalence about trade liberalization.
  • The United States had experienced trade surpluses during most of the years following World War II.
  • An even bigger factor leading to the ballooning U.S. trade deficit, however, was a sharp rise in the value of the dollar.
  • Between 1980 and 1985, the dollar's value rose some 40 percent in relation to the currencies of major U.S. trading partners.
  • American officials viewed the trade balance with mixed feelings.