Economics Trade Surpluses And Deficits Questions
Trade surpluses and deficits impact the current account by affecting the balance of trade, which is a component of the current account. A trade surplus occurs when a country exports more goods and services than it imports, resulting in a positive balance of trade. This leads to an increase in the current account balance as the country earns more from its exports than it spends on imports. On the other hand, a trade deficit occurs when a country imports more goods and services than it exports, resulting in a negative balance of trade. This leads to a decrease in the current account balance as the country spends more on imports than it earns from exports. Therefore, trade surpluses contribute to a positive impact on the current account, while trade deficits contribute to a negative impact on the current account.