Macroeconomics › Section J · International trade and capital flows › Topic J.6
The level of trade versus the trade balance
How much a country trades and whether its trade is balanced sound like the same question, but they are not. A country can trade heavily and be in balance, or trade little and run a huge deficit, and different forces drive each.
In this topic
- Two different questions
- Measuring the level of trade
- Worked example: two hypothetical countries
- What drives the level of trade
- The United States: low level, large deficit
- Small, open economies
- Worked example: exports above GDP
- Policy affects the two differently
- A surplus is not dominance
- Common mistakes to avoid
- Key takeaways
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