Category: The International Trade and Capital Flows

10.1 Measuring Trade Balances The trade balance measures the gap between a country’s exports and its imports. In most high-income economies, goods comprise less than half of a country’s total production, while services comprise more than half. The last two decades have seen a surge in international trade in services; however, most global trade still takes…

Learning Objectives By the end of this section, you will be able to: A nation’s level of trade may at first sound like much the same issue as the balance of trade, but these two are actually quite separate. It is perfectly possible for a country to have a very high level of trade—measured by its exports of goods and…

Learning Objectives By the end of this section, you will be able to: Because flows of trade always involve flows of financial payments, flows of international trade are actually the same as flows of international financial capital. The question of whether trade deficits or surpluses are good or bad for an economy is, in economic…

Learning Objectives By the end of this section, you will be able to: The close connection between trade balances and international flows of savings and investments leads to a macroeconomic analysis. This approach views trade balances—and their associated flows of financial capital—in the context of the overall levels of savings and financial investment in the…

Learning Objectives By the end of this section, you will be able to: As economists see it, trade surpluses can be either good or bad, depending on circumstances, and trade deficits can be good or bad, too. The challenge is to understand how the international flows of goods and services are connected with international flows…

Learning Objectives By the end of this section, you will be able to: We present the history of the U.S. current account balance in recent decades in several different ways. Figure 10.2 (a) shows the current account balance and the merchandise trade balance—the latter of which is simply the balance on goods exported versus imported—in dollar terms. Figure…

Learning Objectives By the end of this section, you will be able to: A few decades ago, it was common to track the solid or physical items that planes, trains, and trucks transported between countries as a way of measuring the balance of trade. Economists call this measurement the merchandise trade balance. In most high-income economies,…

Figure 10.1 A World of Money We are all part of the global financial system, which includes many different currencies. (Credit: modification of “Money from around the world” by Images Money/Flickr, CC BY 2.0) Chapter Objectives In this chapter, you will learn about: Bring It Home More than Meets the Eye in the Congo How much do you…