What is a key characteristic of a trade deficit?

A trade deficit occurs when a country imports more goods and services than it exports. This means that the value of all goods and services imported into the country is greater than the value of all goods and services sold to other countries. When a nation has a trade deficit, it indicates reliance on foreign products and services to fulfill domestic demand, which can impact the country’s currency value and economic standing.

In contrast, if exports are greater than imports, it results in a trade surplus, while equal imports and exports balance out trade, indicating a stable trade relationship with other countries. The option regarding no relations with foreign countries does not directly connect to the concept of trade deficits and would imply isolationism rather than the dynamics of trade. Therefore, the correct characterization of a trade deficit is when imports exceed exports.