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What is a trade deficit?

Posted on April 14, 2014 at 7:00 PM

A trade deficit occurs when a country's imports (M) are greater than its exports (X) in the short run. Net exports (Xn) are negative. Imports and exports are current account transactions. A trade deficit often contributes to a current account deficit (of capital account surplus).

In the long run, a nation's imports (a leakage) will equal its exports (an injection).

AP Macroeconomics Unit 6 International Trade

Categories: AP Macroeconomics, Macro Unit 6 International Trade

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