VI.A. - Real GNP = Real GDP + Real National Income = Real...

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VI. A. Balance of Payments 1. National Income Accounting with a focus on International Transactions Now we can buy and sell goods and assets across borders. For simplicity, assume that the only assets that can be traded across borders are bonds. Asset Trading --- holding of international assets net of their holdings of our assets > 0 (net international investment position--lender) < 0 (net international investment position--borrower) (net foreign investment—change in asset position)
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(real interest income earned from foreign assets)
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Unformatted text preview: Real GNP = Real GDP + Real National Income = Real GDP Depreciation + = Real Expenditures = Real Expenditures = Real Income => = => = or (*) = Goods Trading => (**) (trade balance) Combining (*) and (**) (***) = (current account) Start with an initial net asset position with NX > 0 => > 0 (trade surplus => net international lender) NX < 0 => < 0 (trade deficit => net international borrower) 2. History of Trade and Current Account Balance Barro Ch.17 PP1-3...
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This note was uploaded on 02/19/2011 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue University-West Lafayette.

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VI.A. - Real GNP = Real GDP + Real National Income = Real...

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