Chapter 10 The International Trade and Capital Flows

Balance of Trade (Trade Balance)

the gap, if any, between a nation’s exports and imports

Current Account Balance

a broad measure of the balance of trade that includes trade in goods and services, as well as international flows of income and foreign aid

Exports of Goods and Service as a Percentage of GDP

the dollar value of exports divided by the dollar value of a country’s GDP

Financial Capital

the international flows of money that facilitates trade and investment

Merchandise Trade Balance

the balance of trade looking only at goods

National Savings and Investment Identity

the total of private savings and public savings (a government budget surplus)

Unilateral Transfers

“one-way payments” that governments, private entities, or individuals make that they sent abroad with nothing received in return

Necessity of a Trade Deficit

net inflow of financial capital from abroad

Necessity of a Trade Surplus

net outflow of financial capital form an economy to other countries

Supply of Financial Capital = Demand for Financial Capital

S + (M-X) = I + (G-T)