In this post we will talk about the balance tradel, its meaning, operation and something else. So we invite you to join us because it will be a very interesting topic.
Balance of trade
It is a way to be able to put in values, and calculate the amount of products that are imported and exported in a country, to be able to make a calculation, which helps you to verify the way in which you can check the income and expenses that can be generate the market.
trade balance, together with the balance of services, the balance of income and the balance of transfers, make up the current account balance, which is one of the main accounts for generally knowing the economic situation of a country.
Understanding the balance of trade
La balance of trade current, together with the capital and financial accounts managed by a country, form the balance of payments, which is an indicator that manages and shows the payments that are made in an economic transfer between imports and exports, in addition to the total income and that goes to the State.
It should be noted that, due to the great variation in the market over time, trade balances are usually made at specific times. This is done with the aim of having a specific calculation of time and possible interactions at the moment in which the analysis is made.
Imports and exports
It is important to mention that imports are the transactions carried out between citizens, companies or directly the government of a country, in which they request a particular merchandise, which they wish to receive in a certain period of time, and for which they must make a payment. payment, in addition to tariffs, transportation, freight, etc.
In the same way, an export is the opposite party, these are the ones that are going to send the product to the country, company or citizen that requires their merchandise for a particular use.
How does the balance of trade work?
La balance of trade It is a calculation that is made through a formula that consists of finding out the difference between the money that the country is investing in imports, as well as in exports, where the calculation that ends up resulting can be expressed both negatively and positively.
- Positive: It is when any good or product is exported in greater quantity, compared to imports, this is called a trade surplus.
- Negative: Unlike the previous one, it is considered negative when the value of exports is less than that of imports, which is called a trade deficit.
Each indicator will affect the economy of a country, hence its importance and the correct administration and management of resources and income.
Factors that can alter the trade balance
There are many factors that we can consider, which influence the behavior of the economy of a country and its citizens. We can consider the following factors:
consumer tastes
Whether for domestic goods or foreign goods, and it can change depending on quality, price, or to support production, it is important to know what the most outstanding tastes are among the people who live in the area to be analyzed.
The prices of the goods
Both inside and outside the country, normally the prices of imported products should be more expensive than those produced in the country of origin, but this does not always end up being the case, it is an important factor in consumer accessibility.
Exchange rates
The exchange rate that individuals can use; the national currency to buy foreign currencies, is related to the inflation that may exist in an economy, due to the fact that when saving, it is much more efficient to do so in foreign currency, rather than in the national currency, which is increasingly to be worth less, unlike the others.
The cost of transporting goods
From one country to another, this is definitely an important factor, unlike many other things, electronic equipment is notable for the variety of price that is added to it when imported from other countries, for example: video game consoles, among others.
With the possibility of increasing depending on the area, up to 200 dollars extra per product, which is a very determining factor in the purchase of merchandise.
Government policy regarding international trade
There are governments that, for different reasons, have as a policy not to accept much imported merchandise, whether due to religions, economic complications, among other factors.
Each of these factors is part of the economy of a country, collaborating in its correct administration and management of resources, causing a positive or negative balance to be determined, and how it will impact the market economy.
Importance
La balance of trade It becomes an indicator of great importance for any country, since it will show the levels of export and import, the flow of income, the payments made and their investment. If the balance becomes positive, it will be of greater benefit to the country.
When the balance is positive, it will be a very good indicator for the country, because there will be more products for sale, and if the indicators are negative, it will not be favorable for a country to prolong this situation without alternative plans, because the only thing that will achieve is to increase its level of indebtedness.
If you want to have a broader and more detailed view of this interesting topic of commerce, then you should visit this article, which will clarify many doubts about finances: Economic models.
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