Balance of Trade - Import Export | Foreign exchange and trade | Macroeconomics

Balance of Trade (BoT)

Balance of trade is the difference between the goods and services imported as well as exported by a country to another countries. So it is basically a record, which keeps a track of the trade between countries. And by trade we mean both import and export of goods and services. 

BoT value can be both negative and positive

Balance of trade has both positive and negative aspects, meaning its value can go in both positive as well as negative number. Let's understand the negative aspect first, suppose you are a country that is importing - that is purchasing goods and services from some other country then you will have to pay a lot of money for that, because you are in the receiving end. Now, if you are providing good and services that is being created in your country and sending it to other countries in fulfilling their needs then you are exporting - here you will receive a lot of money in return because now you are a provider. 

There is also a video that explains about Balance of Trade. In case you want to check out here is the link:- https://www.youtube.com/watch?v=CYlVyIDsWFg

One more important thing that you will have remember when it comes to understanding Balance of Trade is that, if the import is more than the export then the cost is going to be more than the revenue - meaning you will have to pay more in importing than exporting the same good. Let's quickly summarize this topic, a negative balance means a country's import is more than export. which is. Now if the value of balance of trade is in negative that will lead to exhaustion of a country's financial reserve.