The balance of trade measures the difference in value over a period of time between a country's imports and exports of merchandise. A favorable balance, or trade surplus, occurs when exports exceed imports, while an unfavorable balance, or trade deficit, occurs when imports outweigh exports.
A favorable trade balance occurs when the value of a nation’s exports exceeds the value of its imports, resulting in a surplus.
Mercantilism is an economic theory and practice dominant in Europe during the 17th and 18th centuries that promoted governmental regulation of a nation's economy for the purpose of augmenting state power at the expense of rival national powers. It advocates that a nation should export more than it imports to accumulate wealth, primarily in the form of precious metals like gold and silver. Under mercantilism, trade surpluses were viewed as critical for increasing the nation's reserves.
A trade deficit occurs when a country's imports exceed its exports, resulting in a negative balance of trade, while a trade surplus occurs when exports exceed imports, leading to a positive balance of trade.
