What is meant by a 'trade deficit' ?

Correct option is C

Correct Answer: (c) When a country's imports exceed its exports

Explanation:
A trade deficit occurs when the value of a country’s imports exceeds the value of its exports over a specific period. This indicates that a country is buying more goods and services from other nations than it is selling to them. The trade deficit is calculated using the formula:

Trade Deficit = Total Imports - Total Exports

While a trade deficit is not inherently negative, prolonged deficits may impact the country’s currency value, increase foreign debt, or indicate over-reliance on imported goods.

Knowledge Booster:
● Trade Surplus: When exports exceed imports, resulting in a positive trade balance.
● A trade deficit can lead to an outflow of domestic currency to foreign markets, affecting the country’s exchange rate.
● Countries with growing economies often experience trade deficits due to high import demands for capital goods and raw materials.
● It can also signify increased consumer spending and demand within the economy.
● The current account balance includes trade deficits or surpluses and is an essential economic indicator.

Additional Information:
● When a country's trade is balanced (Option a): Refers to a situation where imports equal exports, known as balanced trade.
● When a country has no trade at all (Option b): Refers to trade isolation or autarky, not relevant to trade deficit.
● When a country's exports exceed its imports (Option d): Refers to a trade surplus, opposite of a trade deficit.