OPEN-ECONOMY MACROECONOMICS: BASIC CONCEPTS
closed economy, p. 658
open economy, p. 658
exports, p. 658
imports, p. 658
net exports, p. 658
trade balance, p. 658
trade surplus, p. 658
trade deficit, p. 659
balanced trade, p. 659
net foreign investment, p. 661
nominal exchange rate, p. 668
appreciation, p. 668
depreciation, p. 668
real exchange rate, p. 669
purchasing-power parity, p. 670
Define net exports and net foreign investment. Explain
how and why they are related.
Explain the relationship among saving, investment, and
net foreign investment.
If a Japanese car costs 500,000 yen, a similar American
car costs $10,000, and a dollar can buy 100 yen, what are
the nominal and real exchange rates?
Describe the economic logic behind the theory of
If the Fed started printing large quantities of U.S.
dollars, what would happen to the number of Japanese
yen a dollar could buy?
Questions for Review