#Balance of Trade #meaning #feature

2. exports
imports
balance of
payments
The balance of trade is also referred to as the trade balance, the international trade balance, the commercial
balance, or the net exports.

3. The formula for calculating the BOT can be simplified as the
total value of exports minus the total value of its
imports. Economists use the BOT to measure the relative
strength of a country's economy.
BOT = Exports −
Imports
Exports represents the currency value of all goods sold to foreign countries,
as well as other outflows due to remittances, foreign aid, donations or loan
repayments.
Imports represents the dollar value of all foreign goods imported from abroad,
as well as incoming remittances, donations, and aid.
Calculating the balance of trade

5. A favorable balance of trade, also known as a trade surplus,
occurs when a country exports more goods than it imports.
This means that the country is earning more from its exports
than it is spending on its imports, and it is generally seen as a
sign of economic strength. A trade surplus can be a result of a
country having a competitive advantage in the production
and export of certain goods, or it can be the result of a
country's currency being relatively undervalued, making its
exports cheaper for foreign buyers.

6. On the other hand, an unfavorable balance of trade, also known
as a trade deficit, occurs when a country imports more goods
than it exports.This means that the country is spending more
on imports than it is earning from exports, and it can be a cause
for concern if it persists over a long period of time. A trade
deficit can be the result of a country having a comparative
disadvantage in the production of certain goods, or it can be the
result of a country's currency being relatively overvalued,
making its imports cheaper and its exports more expensive.

7. Here's an example of how to calculate the balance of trade:
Let's say that a country's exports of goods in a given year are worth
$100 million, and its imports of goods are worth $80 million.
To calculate the balance of trade, you would subtract the value of the
imports from the value of the exports:
Balance of trade = Exports - Imports
= $100 million - $80 million
= $20 million
In this example, the balance of trade is $20 million, which means
that the country has a trade surplus of +$20 million.

8. 1. Exchange Rates: Fluctuations in currency values impact the price
competitiveness of exports and imports, affecting the BoT.
2. Domestic and Global Demand: Changes in consumer preferences,
both domestically and internationally, can impact export and import
volumes.
3. Domestic Production Cost: The cost of production within a country,
influenced by factors like labour, technology, and resources, affects
export prices and competitiveness.
4. Trade Policies: Tariffs, quotas, subsidies, and other trade policies set
by governments can influence the flow of imports and exports.

9. 5 . Economic Conditions: Economic growth or recession in trading partners can
affect demand for a country's goods and services.
6 . Global Market Conditions: Shifts in global economic conditions, geopolitical
events, or natural disasters can disrupt trade patterns and impact the BoT.
7 .Technological Advancements: Innovations can influence production
efficiencies, thereby affecting export competitiveness.
8 . Relative Inflation Rates: Differentials in inflation rates between countries can
impact price competitiveness in international trade.

10. BASIS FOR
COMPARISON
BALANCE OF TRADE BALANCE OF PAYMENT
Meaning Balance of Trade is a statement that captures the
country's export and import of goods with the
remaining world
Balance of Payment is a statement that keeps
track of all economic transactions done by the
country with the remaining world
Records Transactions related to goods only. Transactions related to both goods and
services are recorded
Capital Transfers Are not included in the Balance of Trade Are included in Balance of Payment
Which is better? It gives a partial view of the country's economic
status
It gives a clear view of the economic position
of the country
Result It can be Favorable, Unfavorable or balanced Both the receipts and payment sides tallies
Component It is a component of Current Account of Balance
of Payment
Current Account and Capital Account

11. https://youtu.be/ncEbLQgAUvs?si=aRgiBNF5aLWj7ZvN
https://en.wikipedia.org/wiki/Balance_of_trade
https://www.investopedia.com/terms/b/bot.asp