420 - 5.0 - OpenEconomy_Student - Econ 420 Intermediate Theory Money Income Employment Prof Aguilar Econ420 | Prof Aguilar 1 Course Outline 1.0

420 - 5.0 - OpenEconomy_Student - Econ 420 Intermediate...

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Econ420 | Prof. Aguilar Econ 420 Intermediate Theory: Money, Income, & Employment Prof. Aguilar 1
Econ420 | Prof. Aguilar 1.0 – Measuring Macroeconomic Data 2.0 – Classical Theory 3.0 – Keynesian Theory Course Outline 4.0 – Macro Theory After Keynes 5.0 – Open Economy Macroeconomics 6.0 – Economic Policy 7.0 – Economic Growth 2
Econ420 | Prof. Aguilar 5.0 – Open Economy Macroeconomics Section 5 – Open Economy Macro 5.2 – IS/LM Analysis By the end of this section you will be able to : describe the factors that drive the BoP detail the international trade accounts 5.1 – BoP & Exchange Rates analyze the impact of a shock upon exchange rates recount basic aspects of the US BoP 3
Econ420 | Prof. Aguilar Section 5 – Open Economy Macro 4 US$ Cement US$ Tractor U.S. Bond Pesos
Econ420 | Prof. Aguilar Section 5 – Open Economy Macro 5 Record of economic transactions between U.S. and foreign residents both in goods & services as well as assets. Record of economic transactions in goods & services between U.S. and foreign residents. Also included are transfers from private individuals and the governments to other countries; Ex - foreign aid.
Econ420 | Prof. Aguilar Section 5 – Open Economy Macro 6 Record of economic transactions in assets between private U.S. and foreign residents. Assets can include stocks, bonds, real estate, etc.. Known as net foreign investment. Capital Inflows – Capital Outflows = Net Capital Inflows Foreign Investment in U.S. Domestic Investment in foreign Net Foreign Investment = = CA
Econ420 | Prof. Aguilar Section 5 – Open Economy Macro 7 Record of economic transactions in assets between public U.S. and foreign entities. Assets can include stocks, bonds, real estate, etc.. Change in foreign central banks’ holdings of U.S. assets Change in domestic central bank’s holding of foreign assets = ORT
Econ420 | Prof. Aguilar Section 5 – Open Economy Macro 8 The offsetting transactions suggest Which has an implication for the Balance of Payments The Balance of Payments combines trade in goods & services and assets In reality there could be accounting errors so,
Econ420 | Prof. Aguilar Section 5 – Open Economy Macro 9 US$ Cement US$ Tractor U.S. Bond Pesos 1 Case 2 Case 3 Case
Econ420 | Prof. Aguilar Section 5 – Open Economy Macro 10 Assume initially that the BoP is in balance; i.e. CU = - (CA + ORT). Suppose a U.S. consumer purchases $100 worth of cement from a Mexican exporter. BoP Accounting Case 1:
Econ420 | Prof. Aguilar Section 5 – Open Economy Macro 11 Assume initially that the BoP is in balance; i.e. CU = - (CA + ORT). Suppose a U.S. consumer purchases $100 worth of cement from a Mexican exporter.

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