How is the balance of trade calculated?Multiple choice question.Imports/ExportsExports + ImportsImports - ExportsExports - Imports

Break Down the Problem

1. Identify the key components of the balance of trade.
2. Understand what imports and exports represent in trade.
3. Analyze the provided options carefully to select the correct formula.

Relevant Concepts

The balance of trade is defined as the difference between the value of a country's exports and the value of its imports. This can be expressed mathematically as:

$\text{Balance of Trade} = \text{Exports} - \text{Imports}$

Analysis and Detail

1. Exports: These are goods and services that a country sells to other countries. Higher exports contribute positively to the balance of trade.
2. Imports: These are goods and services that a country buys from other countries. Higher imports represent a deficit in the balance of trade when they exceed exports.

Among the provided options, we analyze each one:

1. Imports/Exports: This would yield a ratio and does not give the balance of trade.
2. Exports + Imports: This represents the total trade volume but not the balance of trade.
3. Imports - Exports: This reverses the correct formula and does not indicate the balance properly.
4. Exports - Imports: This correctly computes the balance of trade.

Verify and Summarize

The correct formula for calculating the balance of trade takes into account the difference between exports and imports. Therefore, upon analyzing all provided choices, it is clear that:

Final Answer

Exports - Imports is the correct calculation for the balance of trade.