Balance of Trade

Merchandise Trade Balance The gap between exports and imports if goods only Not services Not other payments between countries Exports > Imports—Trade Surplus Exports < Imports—Trade Deficit About 30 years ago we had ship and planes filled with cargo and this was important But today we have call centers in India, movies over the internet and others that make the merchandise trade balance seem limitd

Current Account Balance The single statistic that captures the most comprehensive picture of a nation’s balance of trade Goods Services Net Exports or Commercial Balance Net primary income or factor income Earnings on foreign investments Net unilateral transfers

Current Account Balance Exports/Credit Imports/Debit Balance Merchandise trade $713 billion $1,261 billion -$548 billion Services trade $307 billion $256 billion $51 billion Investment income $294 billion $261 billion $33 billion Unilateral transfers -$67 billion TOTAL -$531 billion

Trade Deficit When the trade balance is zero then the flow of funds out is equal to the flow of funds in We have a deficit which mean dollar are flowing out of the country We were importing and there was not a corresponding flow back in sufficient to offset our imports