ECN 204 Lecture Notes - Foreign Direct Investment, Loanable Funds, Real Interest Rate
25 Apr 2012
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Document Summary
Closed economy: an economy that does not interact with other economies in the world. Open economy: an economy that interacts freely with other economies around the world. Economy interacts with others in two ways: buys/sells goods and services and buys/sells capital assets such as stocks and bonds. The flow of goods: exports, imports, and net exports. Exports: goods and services that are produced domestically and sold abroad. Imports: goods and services that are produced abroad and sold domestically. Net exports/trade balance: the value of a nation"s exports minus the value of its imports. If net exports are positive, exports are greater than imports indicating that the country sells more goods abroad than it buys from other countries. Trade surplus: an excess of exports over imports. Trade deficit: an excess of imports over exports. Balanced trade: a situation in which exports equal imports. Example: what do you think would happen to canadian net exports if:
