Define Balance of Trade

Balance of trade refers to the difference in the value of imports and exports of commodities only i.e. visible items only. Movements of goods between countries is known as visible trade because the movement is open and can be verified by the custom officials with respect to balance of trade the following terminologies are important.

Balanced Balance of Trade

If during a given years exports and imports of the country are equal the balance of trade is said to be Balanced.

Favorable Balance of Trade

If the value of exports exceeds the value of imports the country is said to experience an export surplus or favorable balance of trade.

Un-Favorable Balance of Trade

If the value of imports exceeds the value of its exports the country is said to have a deficit or an adverse balance of trade.