Chapter 13 - Open Economy - HO

Chapter 13 - Open Economy - HO - Open Economy Flows U.S....

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Open Economy Flows U.S. Rest of the World (ROW)
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NX = NCO NX = NCO
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Buying Chinese Goods TRADE ACCOUNT EX IM NX CAPITAL ACCOUNT CO CI NCO U.S. China
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Selling U.S. Goods TRADE ACCOUNT EX IM NX CAPITAL ACCOUNT CO CI NCO U.S. Saudi Arabia
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Saving, Investment, and Net Capital Outflows Y = C + I + G + NX
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Loanable Funds Market in an Open Economy S = I + NCO
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U.S. Trade Deficit Many people worry about the chronic TRADE DEFICIT being run by the United States……. .we buy more foreign goods and services than we sell U.S. made goods and services to foreigners: NX = NCO < 0.
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Nominal Exchange Rates A nominal exchange rate is the price of one country’s currency in terms of another country’s currency:
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Nikon Camera Application: A Nikon camera made in Japan costs 128,000 Yen. The exchange rate e = 80 Yen per U.S. Dollar. What is the dollar cost of this camera? Suppose the Yen price of a dollar rises from 80 Yen per dollar to 100 Yen per dollar. The Yen price of the dollar has increased by _______ percent.
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This note was uploaded on 03/28/2012 for the course ECON 252 taught by Professor Robertholand during the Spring '08 term at Purdue University-West Lafayette.

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Chapter 13 - Open Economy - HO - Open Economy Flows U.S....

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