Chapter 13

Chapter 13 - Open-Economy Macroeconomics: Basic Concepts -...

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Open-Economy Macroeconomics: Basic Concepts - International trade can raise living standards in all countries by allowing each country to specialize in producing those goods and services in which it has a comparative advantage. 1. The Flow of Goods: Exports, Imports, and Net Exports a. Net Exports = ( Country’s Exports) – ( Country’s Imports) b. Factors that influence exports, imports, and net exports: i. Tastes of consumer for domestic and foreign goods ii. Prices of goods at home and abroad iii. Exchange rates at which people can use domestic currency to buy foreign currencies. iv. Incomes of consumers v. Cost of transporting goods vi. Government policies toward trade 2. The Flow of Financial Resources: Net Capital Outflow a. Flow of goods vs. flow of capital i. Goods – Spend money on a new car from Toyota ii. Capital – Invest in Toyota company by purchasing stock b. Net capital outflow = (Purchase of foreign assets by domestic residents) (Purchase of domestic assets by foreigners)
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Chapter 13 - Open-Economy Macroeconomics: Basic Concepts -...

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