What is a trade deficit?

A trade deficit occurs when a country imports more goods and services than it exports. This imbalance indicates that the country is spending more on foreign trade than it is earning from its exports, resulting in a net outflow of domestic currency to foreign markets. A persistent trade deficit can affect a country's economy by leading to increased borrowing and a weaker currency, but it can also reflect strong consumer demand for foreign products or investment in foreign markets.

The other options illustrate different trade situations. While a surplus indicates a favorable balance of trade with more exports than imports, a balanced trade occurs when imports equal exports, neither resulting in a deficit nor surplus. Therefore, the clear definition of a trade deficit aligns with the option stating that a country imports more than it exports.