Balance Of Trade - BOT
 |
Definition of 'Balance Of Trade - BOT'The difference between a country's imports and its exports. Balance of trade is the largest component of a country's balance of payments. 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; the opposite scenario is a trade surplus.Also referred to as "trade balance" or "international trade balance." |
 |
Investopedia explains 'Balance Of Trade - BOT'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 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. |
Related Definitions
Articles Of Interest
-
Exploring The Current Account In The Balance Of Payments
Learn how a country's current account balance reflects the country's economic health. -
What Is The Balance Of Payments?
The balance of payments helps countries to track how much money is coming in and how much money is going out. Learn more about BOPs here. -
Why China's Currency Tangos With The USD
Congress often debates pressuring China to appreciate its currency, but the yuan/dollar peg has benefits for both countries. -
Current Account Deficits: Government Investment Or Irresponsibility?
Deficit can be a sign of trouble for some countries, and of health for others. 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? -
Introduction To Treasury Inflation-Protected Securities (TIPS)
If you want to protect your portfolio from inflation, all you need are a few TIPS. -
Nobel Winners Are Economic Prizes
Before you try to profit from their theories, you should learn about the creators themselves. -
Breaking Down The Balance Of Trade
The balance of trade is a key indicator of a nation’s health. Investors and market professionals appear more concerned with trade deficits than trade surpluses, since chronic deficits may be ... -
Open Market Operations Explained
The term “open market operations” refers to a monetary policy tool in which central banks buy and sell bonds to regulate the money supply in the economy. The United States employs open market ... -
Financial Risks That Don't Pay Off: The Cost Of Reckless Financial Behavior
Despite the recessions, citizens continue to take financial risks and spend outside of their means without fully appreciating the potential consequences for both themselves and the wider economy.
Free Annual Reports