ECON 1B03 Chapter 12: Chapter 12.docx
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ECON 1B03 Full Course Notes
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Closed economy: an economy that does not interact with other economies. Open economy: an economy that interacts freely with other economies around the world. Open economies interact in two ways: buys and sells goods and services in the world product market, buys and sells capital assets such as stocks and bonds in world financial markets. The flow of goods: exports, import, and net export exports: goods and services that are produced domestically and sold abroad imports: goods and services that are produced abroad and sold domestically. Net exports: the value of a nation"s exports; minus the value of its imports; also called the trade balance. Balance trade: a situation in which exports equal imports. Trade balance: the value of a nation"s exports minus imports. Trade surplus: an excess of exports over imports. Trade deficit: an excess of imports over exports. The flow of financial resources: net capital outflow.