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Balance of Trade


In today’s world, all countries import some goods and services from other countries, and they also export certain other goods and services which are surplus in their country. A ‘balance of trade (BOT)’ is a relationship between the country’s imports and exports, in monetary value. Hence Balance of Trade (exchange) is the difference between the value of goods and services exported out of a country and the value of goods and services imported into the country. If a country has a balance of trade deficit, it imports more than it exports, and if it has a balance of trade surplus, it exports more than it imports.
A country is said to be experiencing positive balance of trade, or surplus, if the value of its exports exceed the value of its imports. Conversely, a country is said to be in deficit, or to be having a negative balance of trade (exchange), if the value of its imports is higher than the value of its exports. Countries always tries to have a positive balance of trade.
The balance is said to be favorable when the value of the exports exceeded that of the imports i.e. surplus/positive BOT, and unfavorable when the value of the imports exceeded that of the exports i.e. deficit/negative BOT.

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