- 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