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Introducing Concepts - Trade Deficit and Surplus definitions

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Terms in this set (13)

  • Open Economy
    A system where goods and services are exchanged with other countries, allowing both exports and imports.
  • Closed Economy
    A system isolated from international trade, with no exchange of goods or services with other countries.
  • Export
    Goods or services sold to other countries, representing domestic production consumed abroad.
  • Import
    Goods or services purchased from other countries, representing foreign production consumed domestically.
  • Trade Surplus
    A situation where the value of goods and services sold abroad exceeds the value of those purchased from abroad.
  • Trade Deficit
    A situation where the value of goods and services purchased from abroad exceeds the value of those sold abroad.
  • Comparative Advantage
    The ability to produce a good at a lower opportunity cost than others, driving international trade patterns.
  • Balance of Trade
    The difference between the value of exports and imports, indicating whether a country has a surplus or deficit.
  • Saving
    The portion of output not consumed currently, allowing for potential future investment or consumption.
  • Investment
    Allocation of current resources to increase future output, such as building factories or developing technology.
  • Economic Investment
    Spending on assets like factories or machinery intended to boost future productive capacity.
  • Financial Investment
    Purchasing financial assets like stocks or bonds, distinct from increasing productive capacity.
  • Opportunity Cost
    The value of the next best alternative forgone when making a production or consumption choice.