Answer:
the income its residents earn from exports is equal to the money its residents pay for imports.
Explanation:
Trade can be defined as a process which typically involves the buying and selling of goods and services between a producer and the customers (consumers) at a specific period of time.
A country is said to be in balance-of-trade equilibrium when the income its residents earn from exports (domestic goods sold to other foreign countries) is equal to the money its residents pay for imports (goods bought from foreign countries).
This ultimately implies that, the current account of all of the country's balance of payment are in equilibrium (balanced) and as such there are no deficits.
A deficit can be defined as an amount by which money, falls short of its expected value.
In Financial accounting, deficit is usually as a result of revenue falling below expenses or expense exceeding revenue at a specific period of time.
For instance, if in a country liabilities exceeds assets or import exceeds export there would be a deficit in the financial account of the country.
Generally, a deficit on the current account normally causes a surplus on the capital and financial account. This is simply as a result of a country having to import more goods and services than it is exporting to other countries in trade.
In conclusion, a deficit on the current account is because the value of goods and services exported is lower than the value of goods and services being imported in a particular country.
