Exports have doubled as a percent of gdp since 1975

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Exports have doubled as a percent of GDP since 1975 Balance of Trade vs. Balance of Payments Balance of Trade • Net Exports (Xn) = Exports - Imports • Trade surplus : exporting more than is imported Trade Deficit (trade gap) : exporting less than is imported Per Unit Opportunity Cost = Opportunity Cost/ Units Gained Unit 5 Notes: International Trade Balance of Payments (BOP) • Balance of trade includes only goods and services • Balance of payments considers ALL international transactions • The balance of payments is a broader measure of international trade • The BOP summary is within a given year • Prepared int he domestic country’s currency (ex: BOP of USA would be in the Dollar) • The balance of payments is up of two accounts. The CURRENT ACCOUNT and the CAPITAL ACCOUNT Current Account Trades in Goods and Services (Net Exports) : difference between a nation’s exports of goods and services and its imports of goods and services • ex: toys imported form China, US cars exported to Mexico Investment Income : income from the factors of production including payments made to foreign investors • ex: Money earned by Japanese car producers in the US • Net Transfers : money flows from the private or public sectors • ex: donations, aids, and grants, official assistance Capital (Financial) Accounts • Capital Accounts measures the purchase and sale of financial assets abroad • Purchases of things that stay n the foreign country • US company buys a hotel in Russia • A Korean company sells a factory in Ohio •
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Australian company opens a local mall
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