Chapter 18, Problem 15AA

To determine

To explain the reason behind negative balance of trade.

Explanation of Solution

Trade deficit is when there is a negative balance of trade while there is trade surplus when the balance of trade becomes positive.

Negative balance of trade means the nation has a trade deficit which happens when the exports are less than the imports of the country. High imports leads to this deficit but that does not mean that it is totally bad for the country. This trade deficit can help the nation to be stronger in the future and can lead to economic growth of the nation.