One of the ten principles of economics highlighted in chapter 1 is that trade can make everyone better off. Closed economy: an economy that does not interact with other economies in the world. Open economy: an economy that interacts freely with other economies around the world. Exports: goods and services that are produced domestically and sold abroad. Imports: goods and services that are produced abroad and sold domestically. Net exports (or trade balance): the value of a nation"s exports minus the value of its imports. Trade surplus: an excess of exports over imports. Trade deficit: an excess of imports over exports. Balanced trade: a situation in which exports equal imports. Net capital outflow: the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners. The equality of net exports & net capital outflow. Net exports measure an imbalance between a country"s exports and its imports.