How does trade balance affect real GDP per capita?

The trade balance, which is the difference between a country's exports and imports, can affect real GDP per capita in several ways.

If a country has a trade surplus, meaning its exports exceed its imports, it can lead to an increase in real GDP per capita. This is because a trade surplus indicates that the country is producing and selling more goods and services abroad, which boosts its overall economic output. This increased production can lead to higher incomes and living standards for individuals, resulting in an increase in real GDP per capita.

On the other hand, if a country has a trade deficit, meaning its imports exceed its exports, it can have a negative impact on real GDP per capita. A trade deficit indicates that the country is consuming more goods and services from abroad than it is producing and selling, which can lead to a decrease in overall economic output. This can result in lower incomes and living standards for individuals, leading to a decrease in real GDP per capita.

Overall, the trade balance can have a significant impact on real GDP per capita, with a trade surplus generally leading to an increase and a trade deficit potentially leading to a decrease in real GDP per capita.