The
Explanation of Solution
The difference between the values of export and import of a nation in a given period is known as the balance of trade or the net export. Balance of trade is an important component of the balance of payment of a country. The occurrence of deficit or surplus in the balance of payment depends upon the balance of trade. If the total value of export of a country is less than its imports, then there is a trade deficit. There are several factors that affect the trade deficit, such as value of currency, taste and preference of the consumers, money supply in the domestic economy,
Balance of trade: Balance of trade refers to the difference between the values of a country’s export and import.
Trade deficit: Trade deficit means that the value of import of a country is greater than the value of its export.
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