Unformatted text preview: balanced trade. In the next chapter we develop a theory that explains an economy’s trade bal-ance, but even at this early stage it is easy to think of many factors that might in-fluence a country’s exports, imports, and net exports. Those factors include the following: ± The tastes of consumers for domestic and foreign goods ± The prices of goods at home and abroad ± The exchange rates at which people can use domestic currency to buy foreign currencies ± The incomes of consumers at home and abroad ± The cost of transporting goods from country to country ± The policies of the government toward international trade As these variables change over time, so does the amount of international trade. “But we’re not just talking about buying a car—we’re talking about confronting this country’s trade deficit with Japan.” trade deficit an excess of imports over exports balanced trade a situation in which exports equal imports...
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- Spring '10
- International Trade, trade deficit, exports equal imports