What does a trade balance refer to?

A trade balance refers to the difference between the value of exports and imports. When exports exceed imports, a country has a trade surplus, indicating that it is selling more goods and services to other countries than it is purchasing from them. Conversely, if imports exceed exports, the country has a trade deficit. Understanding this relationship is critical for analyzing a country's economic health and its position in international trade.

This distinction is essential for interpreting trade statistics and formulating economic policies that relate to foreign trade. Trade balance can also impact currency values and economic stability. Hence, the correct answer illustrates the core definition of trade balance in economic terms.