What does trade balance measure?

Trade balance specifically measures the difference between a country’s exports and imports of goods and services over a specific period. A positive trade balance, or trade surplus, occurs when a country exports more than it imports, which can indicate economic strength and competitiveness. Conversely, a negative trade balance, or trade deficit, happens when imports exceed exports, potentially signaling reliance on foreign goods and services. Understanding the trade balance is crucial for assessing a country’s economic health, identifying trends in international trade, and formulating economic policies.

The other options, while relevant to different aspects of economics, do not define trade balance. Employment rates focus on job availability, total economic output is a measure of GDP, and levels of foreign investment pertain to direct investment flows rather than the trade relationship between a country and its international partners.