Trade Deficit Definition

  • A trade deficit implies the value of imports is greater than exports. (M>X)
  • A trade deficit is often split into trade in goods and trade in services.
  • The opposite of a trade deficit is a trade surplus (X>M)

During the 1980s and 1990s, the UK often had a trade deficit. This was because we imported more goods and services than exported.

The balance of trade comprises the majority of a currect account balance. If a country has a trade deficit it will invariably have a current account deficit.

Current account ss comprised of

  • Trade in goods
  • Trade in services
  • Investment incomes
  • Net transfers

Links on Trade Deficit

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