PRINCIPLES OF MACROECONOMICS 2e

for AP Courses

Chapter 09 The International Trade and Capital Flows

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Chapter # Chapter Title

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CH.9 OUTLINE

A World of Money

• We are all part of the global financial system, which includes many different currencies. (Credit: modification of work by epSos.de/Flickr Creative Commons)

9.1 Measuring Trade Balances

Merchandise Trade Balance vs. Current Account Balance

9.2 Trade Balances in Historical and International Context

• Graph (a), shows the current account balance and the merchandise trade balance in billions of dollars from 1960 to 2013.
• If the lines are above zero dollars, the United States was running a positive trade balance and current account balance.
• If the lines fall below zero dollars, the United States is running a trade deficit and a deficit in its current account balance.

9.2 Trade Balances in Historical and International Context, Continued

• Graph (b) shows the same items - trade balance and current account balance - in relationship to the size of the U.S. economy, or GDP, from 1960 to 2015.

A Measure of an Economy's Globalization

9.3 Trade Balances and Flows of

Financial Capital

Flow of Investment Goods and Capital

• Each element of the current account balance involves a flow of financial payments between countries.
• The top line shows exports of goods and services leaving the home country.
• The second line shows the money that the home country receives for those exports.
• The third line shows imports that the home country receives.
• The fourth line shows the payments that the home country sent abroad in exchange for these imports.

The Balance of Trade as the Balance of Payments

9.4 The National Saving and Investment Identity

The National Saving and Investment

Identity, Continued

Domestic Saving and Investment

Determine the Trade Balance

Domestic Saving and Investment

Determine the Trade Balance, Continued

Exploring Trade Balances One Factor at a Time

Short-Term Movements in the

Business Cycle and the Trade Balance

9.5 The Pros and Cons of Trade Deficits

and Surpluses

9.6 The Difference between Level of

Trade and the Trade Balance

Final Thoughts about Trade Balances

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