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oUnproductive workers or poor quality products and services run deficits. Trade surplus: when the value of the goods and services bought from foreigners is less than the value of the goods and services it sells to them.oA country's investment spending during the current year is equal to $120 million, while its level of saving for the current year is $150 million. This country will MOST likely have: trade surplus.International trade is due to comparative advantage: countries export goods their relatively goodat producing and import goods they are not good at producing. (microeconomics)The determinants of the overall balance between exports and imports lie in the decision about savingsand investment spending.oCountries with high investment spending relative to savings run trade deficits.oCountries with low investment spending relative to savings run trade surpluses. Whether a country runs a trade deficit or a trade surplus depends on decisions about saving and investment spending in the country.Macroeconomic forces: has to do with trade surpluses and deficits.
Chapter 7: GDP and CPI: Tracking the Macroeconomy7.1 The National Accounts The national income and product accounts, or national accounts, keep track of the spending of consumers, sales of producers, business investment spending, government purchases and a variety of other flows of money between different sectors of the economy.oIt is a reliable indicator of its state of economic performance.oThe national accounts were created due to the Great Depression. oSimon Kuznet’s developed a set of national income accounts. The first version of these accounts was called National Income, 1929-35. Downfall: focused on income rather thanproduction. o(NIPA) gave us a big advantage during WW2 because the more reliable the accounts, the more economically advanced the country was. It compares American income and outputto that of other nations. oCalculated by Bureau Economic Analysis. Circular Flow Diagram: The inflow of money into each market or sector is equal to the outflow of money coming from that market or sector. HouseholdsoHouseholds have factors of production, such as labor, land, physical capital, human capital, and financial capital. They sell their factors of production to firms and receive wages, profit, interest payments and rent. oThey also derive income from indirect ownership of the physical capital used by firms, in the form of stocks, shares in the ownership of a company, and from direct ownership of bonds, borrowing by firms in the form of an IOU that pays interest. oThe income received from the factor markets includes profits distributed to shareholdersknown as dividendsand interest payment on bonds held by bondholder.