What is the balance of trade calculated as?

The balance of trade is calculated as exports minus imports. This measure indicates the difference between what a country sells to the rest of the world (its exports) and what it buys from other countries (its imports). A positive balance, or trade surplus, occurs when exports exceed imports, while a negative balance, or trade deficit, occurs when imports surpass exports.

Understanding the balance of trade is crucial, as it reflects an important aspect of a nation's economic health and its interaction with the global market. A country with a trade surplus might experience economic growth, whereas a trade deficit could indicate reliance on foreign goods and services. This calculation is a key component of a country’s gross domestic product (GDP) as it contributes to the overall economic indicators.