Principles of Economics- Mankiw (5th) 673

Principles of Economics- Mankiw (5th) 673 - CHAPTER 30 A...

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CHAPTER 30 A MACROECONOMIC THEORY OF THE OPEN ECONOMY 695 CONCLUSION International economics is a topic of increasing importance. More and more, American citizens are buying goods produced abroad and producing goods to be sold overseas. Through mutual funds and other financial institutions, they borrow and lend in world financial markets. As a result, a full analysis of the U.S. economy requires an understanding of how the U.S. economy interacts with other econo- mies in the world. This chapter has provided a basic model for thinking about the macroeconomics of open economies. Although the study of international economics is valuable, we should be care- ful not to exaggerate its importance. Policymakers and commentators are often quick to blame foreigners for problems facing the U.S. economy. By contrast, econ- omists more often view these problems as homegrown. For example, politicians often discuss foreign competition as a threat to American living standards. Econo- mists are more likely to lament the low level of national saving. Low saving im-
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