Pakistan study notes for Matric, Intermediate, B.A, B.COM BSC, M.A, BCS. Free Pakistani Urdu educational school, colleges and University notes.

BALANCE OF TRADE

BALANCE OF TRADE

 

Definition

Every country has to import and export goods and services. Import is the buying from a foreign country and export refers to selling abroad. The difference between import and export bills of a nation during a given period is known as balance of trade / balance of payment.

Balance of trade includes only flow of goods (visible item), ignoring services (invisible items) into or out of a country.

 

Balance of trade of a country will be positive or favorable if its exports exceed imports. The balance will be negative or unfavorable if its import bill is greater than export.

Note: According to some Indian and most Pakistani authors, balance of trade includes only goods excluding services from it. That is, only visible items are taken into account, and not invisible items, in determining balance of trade.

But American and British economists and authors include both goods and services (visible and invisible items) in working out the balance of trade ignoring the term balance of payment. In this book, however, Pakistani concept has been adopted.

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