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Principles of Economics- Mankiw (5th) 655

Principles of Economics- Mankiw (5th) 655 - CHAPTER 29...

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CHAPTER 29 OPEN-ECONOMY MACROECONOMICS: BASIC CONCEPTS 677 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 Key Concepts 1. Define net exports and net foreign investment. Explain how and why they are related. 2. Explain the relationship among saving, investment, and net foreign investment. 3. 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? 4. Describe the economic logic behind the theory of purchasing-power parity. 5. 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 1. How would the following transactions affect U.S.
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