Balance of trade

The commercial balance or net exports (sometimes symbolized as NX), is the difference between the monetary value of exports and imports of output in an economy over a certain period, measured in the currency of that economy. It is the relationship between a nation's imports and exports. A positive balance is known as a trade surplus if it consists of exporting more than is imported; a negative balance is referred to as a trade deficit or, informally, a trade gap. The balance of trade is sometimes divided into a goods and a services balance.

Understanding Balance of Trade

Trade, in general connotation, means the purchase and sales of commodities. In International Trade, purchase and sale are replaced by imports and exports. Balance of Trade is simply the difference between the value of exports and value of imports. Thus, the Balance of Trade denotes the differences of imports and exports of a merchandise of a country during the course of year. It indicates the value of exports and imports of the country in question. If the value of its exports over a period exceeds its value of imports, it is called favourable balance of trade and, conversely, if the value of total imports exceeds the total value of exports over a period, it is unfavourable balance of trade. The favorable balance of trade indicates good economic condition of the country.