| Balance of Trade - BOT | |
 The largest component of a country's balance of payments. It is the difference between exports and imports. Debit items include imports, foreign aid, domestic spending abroad and domestic investments abroad. Credit items include exports, foreign spending in the domestic economy and foreign investments in the domestic economy. A country has a trade deficit if it imports more than it exports, and the opposite scenario is a trade surplus. |
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 The balance of trade is one of the most misunderstood indicators of the U.S. economy. For example, many people believe that a trade deficit is a bad thing. However, whether a trade deficit is bad thing or not is relative to the business cycle and economy. In a recession, countries like to export more, creating jobs and demand. In a strong expansion, countries like to import more, providing price competition, which limits inflation and, without increasing prices, provides goods beyond the economy's ability to meet supply. Thus, a trade deficit is not a good thing during a recession but may help during an expansion. |
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 What Is The Balance Of Payments? - Countries track money coming in and going out through something called the balance of payments. Learn more here. Understanding The Current Account In The Balance Of Payments - Learn how a country's current account balance reflects the country's economic health. Current Account Deficits - Find out what it means when more funds are exiting than entering a nation. What Is The World Trade Organization? - The WTO sets the global rules of trade. But what exactly does it do and why do so many oppose it? |
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