ch18 - OPENECONOMY OPENECONOMY MACROECONOMICS BASICCONCEPTS...

Info icon This preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
OPEN-ECONOMY  OPEN-ECONOMY  MACROECONOMICS: MACROECONOMICS: BASIC CONCEPTS BASIC CONCEPTS OPEN-ECONOMY MACROECONOMICS: BASIC CONCEPTS 1
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
In this chapter,  In this chapter,  look for the answers to these questions: look for the answers to these questions: How are international flows of goods and assets related? What’s the difference between the real and nominal exchange rate? What is “purchasing-power parity,” and how does it explain nominal exchange rates? 2
Image of page 2
OPEN-ECONOMY MACROECONOMICS: BASIC CONCEPTS 3 Introduction One of the Ten Principles of Economics from Chapter 1: Trade can make everyone better off. This chapter introduces basic concepts of international macroeconomics: The trade balance (trade deficits, surpluses) International flows of assets Exchange rates
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
OPEN-ECONOMY MACROECONOMICS: BASIC CONCEPTS 4 Closed vs. Open Economies Recall some important concepts: A closed economy does not interact with other economies in the world. An open economy interacts freely with other economies around the world. It buys and sells goods and services in world product markets. It buys and sells capital assets in world financial markets.
Image of page 4
OPEN-ECONOMY MACROECONOMICS: BASIC CONCEPTS 5 The Flow of Goods & Services Exports : domestically-produced g&s sold abroad Imports : foreign-produced g&s sold domestically Net exports (NX) , aka the trade balance = value of exports value of imports
Image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
OPEN-ECONOMY MACROECONOMICS: BASIC CONCEPTS 6 Trade Surpluses & Deficits NX measures the imbalance in a country’s trade in goods and services. Trade deficit ( NX<0 ) : an excess of imports over exports Trade surplus ( NX>0 ) : an excess of exports over imports Balanced trade ( NX=0 ) : when exports = imports
Image of page 6
What do you think would happen to U.S. net exports if: A. Canada experiences a recession (falling incomes, rising unemployment) B. U.S. consumers decide to be patriotic and buy more products “Made in the U.S.A.” C. Prices of goods produced in Mexico rise faster than prices of goods produced in the U.S. A C T I V E  L E A R N I N G   A C T I V E  L E A R N I N G   1 1         Variables that affect NX Variables that affect NX 7
Image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
A. Canada experiences a recession (falling incomes, rising unemployment) U.S. net exports would fall due to a fall in Canadian consumers’ purchases of U.S. exports B. U.S. consumers decide to be patriotic and buy more products “Made in the U.S.A.” U.S. net exports would rise due to a fall in imports A C T I V E  L E A R N I N G   A C T I V E  L E A R N I N G   1 1         Answers Answers 8
Image of page 8
C. Prices of Mexican goods rise faster than prices of U.S. goods This makes U.S. goods more attractive relative to Mexico’s goods.
Image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern