MGEA06H3 Final: Ch5-Open_Economy
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MGEA06H3 Full Course Notes
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Y = c + i + g = gdp. Implies: (real domestic output or income: domestic income = y = domestic expenditure = c + i + g, saving = investment (snat = i, nx = y ( c + i + g ) = (y c g) i. = domestic saving (from dom sources) (dom inv) Y = c + i + g + nx. Where nx = net exports = exports imports: if nx > 0, then. Trade surplus (export more goods & services than import) We have extra income not spent (& thus extra saving) We are lending this (amount) to the rest of the world (row) Net inflow of ious from row (to pay for nx>0) Net outflow of financial capital from row (i. e. as a nation, in net, we have acquired fin assets abroad: if nx = 0, then. Balanced trade (export same amount of goods & services as import)