Question

In a given year, US exports were $5 billion and imports were $16 billion. What was the US trade deficit or trade surplus that year?

Answer 1

The correct answer is: "The US has a trade deficit of $11 billion".

If the amount of goods imported in a country exceeds the amount of goods exported, like in the case presented, there had been a trade deficit. It can be also said that the country has registered a negative balance of payments. In this scenario, the country will have to seek for resources to finance that difference between the inflows and outflows. Moreover, a trade deficit represents an outflow of domestic currency to foreign markets.

Answer 2

The answer is: United States would have a deficit of $11 billion in the given year.

A trade surplus occurs when a country exports more than it imports. On the other hand, a deficit is when a country imports more products than it exports.

In the above example, the United States is exporting only $5 billion of goods but importing $16 billion of products. This means that the total trade deficit in the example is 16-5 = $11 billion.

This actually represents the current situation of the United States where it has a significant trade deficit with many major economies in the world, most noticeably with China.