More generally, we may think of current account imbalances as providing another example of how countries gain from trade. The trade involved is what we have called intertemporal trade, that is, the trade of consumption over time. Just as countries with differing abilities to produce goods at a single point in time gain from concentrating their production on what they do best and trading, countries can gain from concentrating the world’s investment in those economies best able to turn current output into future output. Countries with weak investment opportunities should invest little at home and channel their savings into more productive investment activity abroad. Put another way, countries where investment is relatively unproductive should be net exporters of currently available output (and thus have current account surpluses), while countries where investment is relatively productive should be net importers of current output (and have current account deficits). To pay off their foreign debts when the investments mature, the latter countries export output to the former countries and thereby complete the exchange of present output for future output.
Gross Domestic Product, or more commonly known for its abbreviated form GDP, is a measure of the total value of final goods and services produced within an economy over a given time period. It is a direct measure of economic activity, and its year on year change is being used to compute measures such as economic growth.
How do we actually unleash the genius within each person?
First we need to recognise (and trust) that every person is special and has his or her own unique talents and abilities. Yet, how many of us have seen teachers who have gave students the disapproving shake of the head, or have heard parents tell their children that they will amount to nothing if they do not get good grades in school?
This is a must-read for all H2 Economics students out there. As you read this article, here are some questions for you to think about and perhaps practice. I will be posting the answers to some of them later this week.
This will be useful for students studying macroeconomics at the H2 level. It discusses economic policy recommendations for America.