Question

Define and give an example of the following: trade deficit, trade surplus, and protectionism.

Answer 1

Trade deficit is when exports is less than the imports. For example, country is exporting goods worth $100 and importing goods worth $200. The trade deficit is imports - exports = $100

Trade surplus is a situation when a country is exporting more goods and services as compared to its imports. For example, exports =$200 Imports =$100. Trade surplus = exports -imports = $100

Protectionism refers to those policies that do not allow free flow of trade between countries. For example tarrifs are put on the import of the goods and services for protecting the domestic industry.