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Unformatted text preview: Chapter 6 continued 28: if want to buy foreign import, “trade” (don’t see it happen) U.S. dollar for foreign currency to get the good- Capital outflow= using our funds to buy foreign goods 29: NX- can have a positive or negative value (currently negative in the U.S.—account deficit) 30: trade surplus- sell more than buy (lending $ to the rest of the world)- U.S. assets may be more attractive then U.S. goods (U.S. stocks) 33: no vertical because not effected by real exchange rate 35: (all other things being equal) money flows to whichever has higher return rate- Tighter monetary policy (makes the dollar less available)- Drop in confidence (not an issue for U.S. now) o US, Germany, UK, Japan= 4 AAA ratings- Capital flight plagues countries- Extreme example: $1=.67 Euros if people in Europe expect $ to go up, go out and buy a lot, example: if traded 670000Euros for $1million before, now worth 1 million Euros so you made money 39 : Fed cut interest rates faster than Europeans, gap got wider—lead to appreciation of $ because...
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This note was uploaded on 08/29/2010 for the course ECON 302 taught by Professor Abrams during the Spring '08 term at University of Delaware.
- Spring '08
- Monetary Policy