Briefly explain what the term "balance of trade" refers to from a macroeconomic perspective and include a brief description of how exports and imports influence the balance of trade.

In a macroeconomic perspective, the balance of trade (BOT) simply refers to the difference between the value of the imports and exports of a country. In measuring the relative strength of a country's economy, economists make use of the balance of trade. Also, in considering the balance of payments, the balance of trade is the largest component considered.

In balance of trade, TRADE DEFICIT and TRADE SURPLUS are usually considered in relation to their import and export activities

The Trade Deficit results when a country imports more good and services than it exports. While the Trade Surplus results when a country exports more goods and services than it imports.

Since 1976, the United States had a trade deficit. This was as a result of their dependency on oil imports and consumer products. While since 1995, China which produces and exports many of the world's consumable goods has recorded a trade surplus.

When trade deficit occurs, countries affected borrow money to pay for their goods and services but when trade surplus occurs in a country, such country lends money to deficit countries.

Formula for BOT = Total Value Of Imports minus (➖) Total value of exports.

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