POL S 7 Lecture 10: Lecture 10
Document Summary
In the absence of global government, how are international currencies supplied and international monetary relations regulated? (ch. Every year, approx trillion is invested abroad. And why do relations between foreign investors and the countries in which they invest often become hostile and politically controversial? (ch. Y=national income, x=exports, s=savings, i= investment, c=domestic consumption, m=imports, g=government consumption, t=taxes. For us: si, t=g; x-m must be positive. Balance gets worse as you go below 0. Us imports 4% more than exports as of 2007. To exchange goods with others in a foreign country, need to convert one currency into the other. Foreigners want to be paid in their currency. To buy assets in another country, foreigners need to convert their currency into the home currency. When x-m<0, a country should depreciate its exchange rate, lowering the price of its goods. A small depreciation causes an (cid:522)increase(cid:523) in price for a foreign product.
