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International Trade

Problems

The Means of Trade

Exchange Rates

Problem : What identity describes both output and income?

Y = C + I + G + NX

Problem : How do we calculate net exports?

We calculate net exports by subtracting imports from exports.

Problem : If a country exports $300 worth of goods and imports $200 worth of goods, what is its net export?

Net exports are $100 in this example.

Problem : What happens when net exports are negative?

When net exports are negative, net foreign investments are positive as foreigners gain stock in domestic firms to pay for imports.

Problem : Would you expect a country that has few imports and many exports to have much foreign investment?

A country with few imports would likely have a significant amount of interest in other foreign countries, but little foreign investment in the country.

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