ECN 204 Lecture : ECN204 - Chapter 12 .doc

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jadegnat800

22 Apr 2012

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Document Summary

Ecn204 chapter 12 notes: closed vs. open economies, a closed economy does not interact with other economies in the world, an open economy interacts freely with other economies around the world, the flow of goods and services. It buys and sells goods and services in world product markets. Trade deficit: an excess of imports over exports. Trade surplus: an excess of exports over imports. Balanced trade: when exports = imports: the flow of capital, net capital outflow (nco): domestic residents" purchases of foreign assets minus foreigners" purchases of domestic assets. Nco is also called net foreign investment. When a canadian resident buys stock in telmex, the mexican phone company, the purchase raises canadian net capital outflow: the flow of capital abroad takes two forms: Foreign direct investment: domestic residents actively manage the foreign investment e. g. , tim hortons opens a fast food outlet in russia, that is an example of foreign direct investment.

Related Questions

According to the foreign purchases effect, prices in the United States and prices in other countries remain stable, without a corresponding adjustment in exchange rates

A. U.S. consumers will buy more foreign goods and services, and imports will fall foreigners will buy fewer goods and services produced in the United States, and exports will increase. The number of net exports will fall increasing the quantity of real GDP demanded, resulting in a downward sloping aggregate demand curve.

B. U.S. consumers will buy more foreign goods and services, and imports will rise, foreigners will buy fewer goods and services produced in the United States, and exports will fall. The number of net exports will fall, reducing the quantity of real GDP demanded, resulting in a downward sloping aggregate demand curve..

C. U.S. consumers will buy fewer foreign goods and services, and Imports will rise foreigners will buy more goods and services produced in the United States, and exports will fall. The number of net exports will rise, reducing the quantity of real GDP demanded, resulting in a downward sloping aggregate demand curve.

D. U.S. consumers will buy more foreign goods and services, and Imports will fall foreigners will buy fewer goods and services produced in the United States, and exports will rise. The number of net exports will rise, reducing the quantity of real GOP demanded, resulting in a downward sloping aggregate demand curve.