Question

"The trade deficit reduces our GDP."- explain.

Answer 1

When any countries import is more than export then is called trade deficit.So for countries GDP the balance of trade should be maintained.

Now we know that the total value of goods and services produced within a country is known as GDP and so if import is more than export it means that the demand of foreign product is more and domestic consumers spend more on foreign product which affect the gdp.

If domestic consumers spend more on foreign product then demand of domestic product decreases and if demand decreases then production decreases and so output decreases and so gdp decreases.