Econ110BW11 - Lec15 A - GR_ol

Econ110BW11 - Lec15 A - GR_ol - Macroeconomics B Econ 110B...

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Macroeconomics B Econ 110B, Winter 2011 Prof. Giacomo Rondina Lecture 15
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The Open Economy Trade is in goods, services and capital (financial assets). Outcome of economic policies depend on international trade. T d B l d I l B i d L di Trade Balance and Intertemporal Borrowing and Lending Balance of Payments (Current Account and Capital Account) GDP and GNP 2 Openness in Goods and Financial Markets (Ch. 18)
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Open Economy: Difference Between GDP and GNP GNP: Gross National Product Value added by domestically owned factors of production (ownership of factors matters) GDP: Gross Domestic Product Value added domestically (location of factors matters) GDP + IR – IP = GNP Factor payments Factor payments received from the rest of the world paid to the rest of the world 3 Openness in Goods and Financial Markets (Ch. 18)
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Open Economy: Difference Between GDP and GNP GNP: Gross National Product Value added by domestically owned factors of production (ownership of factors matters) GDP: Gross Domestic Product Value added domestically (location of factors matters) GDP + IR – IP = GNP Rest of the World (W) A Owner Location Factors of Production: K A A Inside A Inside A A A O t id A O t id A A K Y K K Y W W Inside A Inside A W W W O t id A O t id A K Y K K Y Outside A Outside A Outside A Outside A A A A Inside A Outside A GNP Therefore: Y Y + A Outside A IR notice: Y = 4 Openness in Goods and Financial Markets (Ch. 18) A W A Inside A Inside A GDP Y Y + W Inside A IP Y =
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