Balance of trade is the difference between export and import of the country during the definite time period, most often one year. Balance of trade includes the goods and services which have been sold and purchased instantly; bought in credit and provided by the state in the form of the governmental aid for free. If export of the country is higher than import, its balance of trade becomes active, if vice versa – passive. Balance of trade defines the approximate condition of the country’s economy and the majority of the serious economic decisions should be made according to the condition of this indicator. It is quite natural that if the country’s export is higher than import – the economic condition of the state is much better, because it makes money and invests it into the development of various branches of economics.
And if import is higher, it means that the country is not able to produce quality goods and services and has to purchase them abroad losing more and more money all the time. Obviously, the developing countries have passive balance of trade, because they can not produce quality goods which can compete on the international market, so they import them and this factor prevents them from improvement. Speaking about the definite examples, one can note China, Japan and Germany as the countries with high active balance of trade, because they produce quality goods related with electronics and machine building industry. Russia and Saudi Arabia maintain this active indicator with the help of their mineral resources, mainly oil and gas. Sometimes it happens that the country’s balance of trade becomes active, because of poverty and low demand in expensive electronics and other products from abroad.
Balance of trade is an interesting issue on economics which observes the connection and interdependence between the country’s export and import. The student is able to observe the problem in detail and think about the cause and effect of the problems on balance of trade, their solution and methods of the improvement on the country’s economy considering the indicators of export and import. Naturally, one is able to pay attention to every point of the problem, observe the structure, aspects and principles of balance of trade and draw the right conclusions.
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