What are trade deficits and trade surpluses?

Trade deficits and trade surpluses are important concepts in international economics that describe the balance of trade between a country and the rest of the world.

A trade deficit occurs when a country imports more goods and services than it exports. This means that the value of the goods and services that are brought into the country exceeds the value of those sold to other countries. A persistent trade deficit can indicate that a country is consuming more than it produces, which may impact its economy and currency value over time. Option C accurately captures this definition.

In contrast, a trade surplus happens when a country exports more than it imports. This indicates that the country is selling more to foreign markets than it is buying from them, resulting in a positive trade balance. The definitions of trade deficit and trade surplus are distinct, and understanding this distinction is crucial for analyzing a country's economic health and trade policies.

The terms are not interchangeable; they represent opposite sides of the trade balance that can influence factors like employment, currency strength, and domestic production. Hence, it’s essential to grasp the precise meanings behind each term to effectively engage with economic discussions.