Domestic Imbalance: A Role for Trade Balances
Almost always trade involves the exchange of goods or services for money. The seller wants money, and key to the execution of the trade, the buyer wants the product or service and has the money. When it’s domestic, we consider the process balanced. There’s usually an increase in GDP as a result, if an unremarkable one. It’s trade and it’s how commerce happens.
But when it’s across borders, we talk about trade differently. When a seller from abroad sends goods or services into the U.S. economy in exchange for money, we call it an unbalanced trade or a trade deficit. We see goods or services being imported but no domestically produced equivalent exported. It’s goods exchanged for money or ...
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