| Description | The largest component of a country's balance of payments. It is the difference between exports and imports. A country has a trade deficit if it imports more than it exports; the opposite scenario is a trade surplus. 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. |