Economics Trade Surpluses And Deficits Questions
Trade surpluses and deficits impact the current account balance by directly affecting the balance of trade. A trade surplus occurs when a country exports more goods and services than it imports, resulting in a positive balance of trade. This surplus contributes to a positive current account balance as it indicates that the country is earning more from its exports than it is spending 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 deficit contributes to a negative current account balance as it indicates that the country is spending more on imports than it is earning from exports.
In summary, trade surpluses contribute to a positive current account balance, while trade deficits contribute to a negative current account balance.