5.1 Balance of Payments

An aggregate economy that does not engage in trade with foreign partners

and uses protectionist measures to keep goods, resources, and financial

investment from coming in and leaving its borders.

• open economy

• closed economy

An aggregate economy that engages in free trade with foreign partners and

allows the free flow of goods, resources, and financial investment in and out of

its borders.

• open economy

• closed economy

Balance of Payments is the record of any and all economic transactions between two countries that

are engaged in trade.

• true

• false

Any interest or dividends paid to or from domestic

investors. Interest/dividends paid to domestic investors

are positive, paid to foreign investors are negative.

• net investment

• net exports

• net transfers

Any aid or grants paid to and from the domestic economy.

This includes international aid or the transfer of income.

Paid to the domestic economy is positive, from is negative.

• net investment

• net exports

• net transfers

The difference in the value of all exported goods and services sold

and all imported goods and services purchased, including labor.

Exports count as a positive and imports count as a negative.

• net investment

• net exports

• net transfers

The purchase of foreign and domestic financial assets.

Foreign purchase of domestic assets is positive,

domestic purchase of foreign assets is negative.

• financial investments

• real investments

The purchase of foreign and domestic land and

businesses, including plant capacities and factories.

Foreign purchase of domestic assets is positive, domestic

purchase of foreign assets is negative.

• financial investments

• real investments

PART B:

AGGREGATE ECONOMY OF COUNTRY A

Indicate the Real GDP output produced

and consumed if Country A is a

CLOSED economy.

JUST THE NUMBER

(a)  

PART B:

AGGREGATE ECONOMY OF COUNTRY A

Indicate the quantity of Real GDP that

Country A will import if it engages in

trade at the WORLD PRICE (PW).

JUST THE NUMBER

(a)