An Introduction to Open Economy Macroeconomics and the Balance of Payments
The economy of a nation is composed of four sectors: household, business, government, and foreign. The household sector supplies resources or factors of production, such as land, natural resources, capital goods, and labor, to the business sector. The business sector pays for these factors of production through the sale of the goods and services. The government collects taxes from the households and businesses and spends the tax revenues on goods and services. The foreign sector includes spending by the rest of the world on a nation’s exports, which is a source of income, which is then spent by households and firms on imports.
Gross domestic product (GDP) is ...
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