Balance of Trade

HideShow resource information
  • Created by: MB-94
  • Created on: 31-03-13 11:21

Invisible trade.

ü  This is the exchange of physically intangible items between countries.

ü  Invisible trade can be distinguished from visible trade, which involves the export, import, and export of physically tangible goods.

ü  Basic categories of invisible trade include services (receipts and payments arising from activities such as customer service or shipping); income from foreign investment in the form of interest, profits, and dividends; private or government transfers of monies from one country to another; and intellectual property and patents.


Balance of trade.

The balance of trade, or net exports (sometimes symbolized as NX), is the difference between the monetary value of exports and imports of output in an economy over a certain period.

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.

The balance of trade is sometimes divided into a goods and a services balance.




Favorable Trade Balance

o   Countries generally try to create trade policies that encourage a trade surplus. They consider this to be a favorable trade balance because it's like making a profit as a country. They prefer to sell more, so you can get a higher income, and have more capital for the residents. This will translate into a higher standard of living. That's because the businesses will sustain a competitive by gaining the expertise in producing everything they export. They will hire more workers, reducing unemployment and generating more income for your residents.

o   To maintain this favorable trade balance, leaders often resort to trade protectionism. They protect domestic industries, by levying tariffs, quotas or subsidies on imports. This usually works great until other countries retaliate, and slap on their own tariffs.

o   In special circumstances, a trade deficit can actually be a more favorable balance of trade. It all depends on where the country is in its business


No comments have yet been made

Similar Economics resources:

See all Economics resources »See all Globalisation and trade resources »