notes16 - 13 Open-Economy Macroeconomics: Basic Concepts...

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Open-Economy Macroeconomics: Basic Concepts 13
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International Flows of Goods & Capital Closed economy Does not interact with other economies in the world Open economy Interacts freely with other economies around the world 2
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International Flows of Goods & Capital Flow of goods: exports, imports,& net exports Exports Goods & services produced domestically sold abroad Imports Goods and services produced abroad sold domestically Example: A Toyota Camry car produced in the US is not counted in imports. A Ford 3
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International Flows of Goods & Capital Flow of goods: exports, imports,& net exports Net exports Value of a nation’s exports minus the value of its imports Also called trade balance Trade balance Value of a nation’s exports minus the value of its imports Also called net exports 4
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International Flows of Goods & Capital Flow of goods: exports, imports,& net exports Trade surplus Excess of exports over imports Trade deficit Excess of imports over exports Balanced trade Exports equal imports 5
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International Flows of Goods & Capital Factors - influence a country’s exports, imports, and net exports: Tastes of consumers for domestic & foreign goods Prices of goods at home and abroad Exchange rates People use domestic currency to buy foreign currencies Incomes of consumers at home and abroad Cost of transporting goods from country to country Government policies toward international trade 6
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Increasing importance of international trade and finance 1950s, imports and exports: 4-5% of GDP Recent years: exports-increased more than
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This note was uploaded on 03/03/2012 for the course ECON 252 taught by Professor Robertholand during the Spring '08 term at Purdue University-West Lafayette.

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notes16 - 13 Open-Economy Macroeconomics: Basic Concepts...

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