chapter  13
25 Pages

National income accounting and the balance of payments

The way in which the trade balance – the difference between exports and imports – is interpreted is not necessarily an accurate assessment of an economy’s health. The common opinion is that an excess of imports over exports, a trade deficit, is bad for an economy. On the other hand, an excess of exports over imports, a trade surplus, is considered good economic news. However, this “conventional wisdom” is not necessarily the case, because the trade balance is only a part of a larger economic picture.