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2post - 214 ✦ Chapter 13/Open-Economy Macroeconomics...

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Unformatted text preview: 214 ✦ Chapter 13/Open-Economy Macroeconomics: Basic Concepts KEY POINTS: 1. Net exports are the value of domestic goods and services sold abroad minus the value of foreign goods and services sold domestically. Net capital outflow is the acquisition of foreign assets by domestic residents minus the acquisition of domestic assets by foreigners. Because every international transaction involves an exchange of an asset for a good or service, an economy’s net capital outflow always equals its net exports. 2. An economy’s saving can be used to finance investment at home or buy assets abroad. Thus, national saving equals domestic investment plus net capital outflow. 3. The nominal exchange rate is the relative price of the currency of two countries, and the real exchange rate is the relative price of the goods and services of two countries. When the nominalexchange rate is the relative price of the goods and services of two countries....
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