Chapter5LectureNotesSAK

Chapter5LectureNotesSAK - Updating the Accounting...

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Updating the Accounting Identities Model of a Small Open Economy Exchange Rates Purchasing Power Parity Intermediate Macroeconomics, 321 Chapter 5 Trade Instructor Geoffrey Williams Rutgers University June 3, 2009 Instructor Geoffrey Williams Chapter 5
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Updating the Accounting Identities Model of a Small Open Economy Exchange Rates Purchasing Power Parity Outline 1 Updating the Accounting Identities 2 Model of a Small Open Economy The World Interest Rate Building the SOE Model The Model in Action Trade Deficits & Surpluses 3 Exchange Rates Basics Real Exchange Rates Net Exports Nominal, 2nd Time 4 Purchasing Power Parity The Law of One Price PPP Testing PPP Instructor Geoffrey Williams Chapter 5
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Updating the Accounting Identities Model of a Small Open Economy Exchange Rates Purchasing Power Parity Trade As Percent of GDP Instructor Geoffrey Williams Chapter 5
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Updating the Accounting Identities Model of a Small Open Economy Exchange Rates Purchasing Power Parity What changes when we add trade? 1 Spending no longer needs to equal output (you can buy imports or export excess production) 2 Savings no longer needs to equal investment (you can invest overseas and foreign investors can invest here) Instructor Geoffrey Williams Chapter 5
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Updating the Accounting Identities Model of a Small Open Economy Exchange Rates Purchasing Power Parity Our Old Friend... The National Income Accounts Identity! As we reviewed in Chapter 2, the identity is Y = C + I + G + NX But the unstated aspect is that this is only for consumption, investment and government purchases of domestic goods and services Y = C d + I d + G d + EX (EX = exports of US production) Instructor Geoffrey Williams Chapter 5
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Updating the Accounting Identities Model of a Small Open Economy Exchange Rates Purchasing Power Parity Our Old Friend... The National Income Accounts Identity! As we reviewed in Chapter 2, the identity is Y = C + I + G + NX But the unstated aspect is that this is only for consumption, investment and government purchases of domestic goods and services Y = C d + I d + G d + EX (EX = exports of US production) Instructor Geoffrey Williams Chapter 5
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Updating the Accounting Identities Model of a Small Open Economy Exchange Rates Purchasing Power Parity Our Old Friend... The National Income Accounts Identity! As we reviewed in Chapter 2, the identity is Y = C + I + G + NX But the unstated aspect is that this is only for consumption, investment and government purchases of domestic goods and services Y = C d + I d + G d + EX (EX = exports of US production) Instructor Geoffrey Williams Chapter 5
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Updating the Accounting Identities Model of a Small Open Economy Exchange Rates Purchasing Power Parity Our Old Friend... The National Income Accounts Identity! As we reviewed in Chapter 2, the identity is Y = C + I + G + NX But the unstated aspect is that this is only for consumption, investment and government purchases of domestic goods and services Y = C d + I d + G d + EX (EX = exports of US production) Instructor Geoffrey Williams Chapter 5
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Updating the Accounting Identities Model of a Small Open Economy
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