Trade Deficit Meaning

Trade deficit is the term which is used in the context of international trade. When a country exports and imports goods and services then rarely both exports and imports would be equal, when the total exports of the country is less than the total imports then it is called trade deficit. A trade deficit should be not be considered as bad, however if deficit remains for a long period of time then it can lead to trouble for the currency of the nation as well as balance of payment situation of the nation because it implies that there would be constant outflow of money to other nations which will result in demand for foreign currency leading to depreciation of the local currency which puts pressure on the foreign exchange reserves of the country.


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