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Japan generally runs a significant trade surplus. Do you think this is most related to high foreigndemand for Japanese goods, low Japanese demand for foreign goods, a high Japanese saving raterelative to Japanese investment, or structural barriers against imports into Japan? Explain your answer.
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Video by Kaylee Mcclellan
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02:33
Yi Chun Lin
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Chapter 32
A Macroeconomic Theory of the Open Economy
The Data of Macroeconomics
The Real Economy in the Long Run
The Macroeconomics of Open Economies
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asking ourselves the question why does Japan generally generally run a significant trade plus requires us to analyze not only imports and exports that would be our net exports, but things such as interest rates, these saving rates, domestic investment and things of that sort. So to answer this question, we should start with is the fact that the japanese savings rate is pretty high. So with this high japanese savings rate and keeping in mind this is relative to their domestic investment. We see as a result of this is going to be higher net capital outflow. And coming from that, this ends up being matched by a higher net exports. I'm gonna do that. Nx higher net exports and as a result of this, these higher net exports, we tend to see that trade surplus. So Japan generally running this trade surplus, you can see that it starts with this higher savings rate relative to their domestic investment, resulting then in this higher net capital outflow, which is higher net exports, telling us that they then have this trade surplus.
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