Environmental Protection Argument for Restricting Imports

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is the Environmental Protection Argument for Restricting Imports? The potential for global trade to affect the environment has become controversial. A president of the Sierra Club, an environmental lobbying organization, once wrote: “The consequences of...

Specialization and Gain from Trade

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

How does Specialization allow for a gain from Trade? Consider the category of machinery, where the U.S. economy has considerable intra-industry trade. Machinery comes in many varieties, so the United States may be exporting machinery for manufacturing with wood, but...

Income Payments – Economics

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What are Income Payments? Income payments on assets, as the name implies, is income resulting from ownership of assets – including, interest, dividends, rents, royalties, etc. The third component of the current account balance, labeled “income payments,” refers...

Trade Surplus or Trade Deficit – Which is Better?

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

Is it better to have a trade surplus or a trade deficit?  Because flows of trade always involve flows of financial payments, flows of international trade are actually the same as flows of international financial capital. The question of whether trade deficits or...

Balance of Trade vs Balance of Payments

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is the Balance of Trade as a Balance of Payments? The connection between trade balances and international flows of financial capital is so close that economists sometimes describe the balance of trade as the balance of payments. Each category of the current...

Domestic Saving and Investment and the Trade Balance

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

How does Domestic Saving and Investment Determine the Trade Balance?One insight from the national saving and investment identity is that a nation’s own levels of domestic saving and investment determine a nation’s balance of trade. To understand this point,...