Chapter 1 Keeping Up with a Changing World—Trade Flows, Capital Flows, and the Balance of Payments Chapter Outline International Economic Integration: The Importance of Global Trade and Financial Markets The Balance of Payments Examples of International Transactions and How they Affect the Balance of Payments The Capital Account and the International Flow of Assets Relating the Current Account Balance and Capital Flows Chapter Summary Questions and Problems Online Application Selected References and Further Reading Teaching Tips Part 1, Chapter 1: Issues to discuss or research on the web: 1. The World has changed structurally as there has been an increase in global transactions. This globalization of economic activity involves the expansion of international trade between nations, but the growth in international financial flows has been much more significant. Thus there has been an increasing “interconnectedness” between countries. The U.S. economy is affected increasingly by what happens in other countries, and the United States has a greater impact on other countries. In terms of international trade (real side—goods and services transactions—think of the global supply chains that bring fresh food, clothing, and retail products into the megacities of the World. Look at the number of students from other countries in your classes. In terms of the financial side, the liberalization of many major global financial markets, the rise in the number of affluent wealth holders seeking diversification and higher retu