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lecture 21 ~ chater 12.docx

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Hannah Holmes

Why do some countries have trade deficits? Net Exports  Net exports (trade balance): exports – imports  Goods and services travelling across a national border  Exports: goods and services that are produced domestically and sold abroad  Imports: goods and services that are produced abroad and sold domestically  Tourism (service); something purchased abroad, by a Canadian; American comes to Canada and purchases something, export What affects Net Exports?  Factors affecting the trade balance: 1. tastes (foreign/domestic goods)  cappuccino maker produced in Italy would be better than one produced in Canada; buy the import 2. prices (foreign/domestic) 3. exchange rates 4. govn’t trade policies 5. income (foreign/domestic)  when foreign income goes up, foreigners buy more of everything (including things produced in Canada), our exports go up  affect on imports  when Canadian income goes up, we buy more of everything (including stuff in other countries), imports go up, net exports go up 6. transportation costs which industry is the largest in terms of Canadian exports? ~ automotive/ machinery & equipment products Net Capital Outflow  net capital outflow (NCO): the purchase of foreign assets by domestic residents – the purchase of domestic assets by foreign residents  also called “net foreign investment” (NFI)  purchasing an American ass
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