Final answer:
National debt is the total borrowing by a government; a budget deficit occurs when spending exceeds income; a trade deficit is when imports exceed exports. The balance of payments records all transactions with the world and includes trade balance. The U.S. often runs a trade deficit, which can be beneficial or detrimental depending on how it is used.
Step-by-step explanation:
The difference between national debt, budget deficit, and trade deficit is a fundamental concept in economics. The national debt is the total amount of money that a country's government has borrowed and not yet repaid. A budget deficit occurs when a government spends more money than it takes in over a fiscal year, which often contributes to the national debt if the deficit is financed through borrowing. On the other hand, a trade deficit happens when a country's imports exceed its exports within a certain period, indicating that more capital is leaving the country to pay for imports than is entering from export sales.
The balance of payments is a comprehensive record of all transactions made between residents of one country and the rest of the world over a period of time. It includes the trade balance, capital flows, and financial transfers. The balance of payments must theoretically balance out over time, as transactions are accounted for in terms of debits and credits.
In recent decades, the U.S. trade balance has usually been in a deficit. A trade surplus means an overall inflow of financial capital to an economy, while a trade deficit indicates an outflow. The two main sides of the national savings and investment identity are savings and investments themselves, and its main components include private saving, government saving (or dissaving if there is a deficit), and foreign investment. A trade deficit can work out well for an economy if it finances investments that lead to future growth; however, it can be problematic if used to finance consumption that does not contribute to growth. A trade surplus does not guarantee strong economic growth, as it also depends on how the surplus is utilized in the economy.
The three factors that determine a nation's trade volume relative to GDP are the size of the economy, its geographical location, and its trade policies. The difference between trade deficits and the balance of trade is that trade deficits refer specifically to a negative trade balance, while the balance of trade refers to the difference between exports and imports, which can be either a surplus or a deficit.