What is Trade Balance?

Definition of Trade Balance: This is also known as balance of trade and is defined as the dissimilarity between the value of imports and exports of the economic output of a certain country for a specific time period. This is one of the several economic fundamentals affecting the value of the currency of a country. A favorable or positive trade balance is called trade surplus when the exports crosses imports. On the other hand, an unfavorable or negative balance is regarded as a deficit of trade or a trade gap. The trade balance is also an important part of the existing account of the nation which consists of money from an international investment posts and the international help and another cross border exchanges. Factors that affect the trade balance consists of movements of exchange rate, relative costs of production between the trading partners, the accessibility of raw materials, different taxes, the accessibility of sufficient overseas exchange or the reserves to make payment for the imports.