ECON-205 Chapter 19 Notes

ECON-205 Chapter 19 Notes - Chapter 19 Exchange Rates and...

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Chapter 19 Exchange Rates and the Macroeconomy Terms International capital flows are purchased and sales of financial assets across national borders. A closed economy is one that does not trade with other nations in either goods or assets. A country’s trade deficit is the excess of its imports over its exports. If, instead, exports exceed imports, the country has a trade surplus . Important Concepts Booms or recessions in one country tend to be transmitted to other countries through international trade in goods and services. A fall in the relative prices of a country’s exports tends to increase that country’s net exports and hence to raise its real GDP. Analogously, a rise in the relative prices of a country’s exports will decrease that country’s net exports and GDP. Price increase for foreign products raise a country’s net exports and hence its GDP. Price decreases for foreign products have the opposite effects. A currency depreciation should raise net exports and therefore increase aggregate
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ECON-205 Chapter 19 Notes - Chapter 19 Exchange Rates and...

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