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Unfavorable Balance of Trade
The difference between the value of a country's exports and the value of its imports such that imports exceed exports. Analysts disagree on the impact, if any, of an unfavorable balance of trade on the economy. Some economists believe that an unfavorable balance of trade, especially if sustained, causes unemployment and lowers GDP growth. Others believe that the balance of trade has little impact, because the more international trade occurs, the more likely it is that foreign companies will invest in the home country, negating any negative effects. An unfavorable balance of trade is also called a trade deficit.
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The amount of goods and services that a country imports that is in excess of the amount of goods and services it exports. Large trade deficits may result in unemployment and a reduction in economic growth in the country with the deficit. Compare trade surplus.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.