What is a trade deficit?

A trade deficit occurs when a country's imports exceed its exports, meaning that the value of goods and services that it buys from other countries is greater than the value of what it sells abroad. This situation is significant because it reflects a country's economic relationship with the rest of the world. A persistent trade deficit can indicate that a country is spending more on foreign trade than it earns, which might suggest underlying economic issues such as reduced competitiveness or reliance on foreign goods. This financial imbalance is often a point of discussion regarding national economic health and international relations. The other choices represent different economic concepts. A balance between exports and imports refers to a trade equilibrium, while a surplus indicates that exports exceed imports. Finally, the mention of currency exchange rates pertains to the financial markets rather than the specific concept of trade deficits.