we learned the identity Y = C + I + G + NX to describe the output of an economy. In this equation, Y is the nominal output, C is money spent on consumption, I is money spent on investment, G is money spent by the government, and NX is net exports or exports less imports. The sum of these costs is the total amount of both income and output in a country. To understand how capital and goods flow in and out of countries, we should keep the Y = C + I + G + NX identity in mind. NX is of particular interest. NX is defined as the total amount of exports less the total amount of imports. NX is positive if a country exports more than it imports, negative if a country imports more than it exports, and zero if exports and imports are equal. Let's work through each of these examples in turn. First we'll examine the simplest case,
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