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ECN 204 Lecture Notes - Hyperinflation, Latte, Arbitrage

26 views7 pages
skywombat72
30 Apr 2012
School
Ryerson University
Department
Economics
Course
ECN 204
Professor
Christopher Gore

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Document Summary

One of the ten principles of economics from chapter 1: trade can make everyone better off. This chapter introduces basic concepts of international macroeconomics: the trade balance (trade deficits, surpluses, international flows of assets, exchange rates. A closed economy does not interact with other economies in the world. An open economy interacts freely with other economies around the world: it buys and sells goods and services in world product markets, it buys and sells capital assets in world financial markets. Net exports (nx), aka the trade balance = value of exports value of imports. Net exports: the value of a nation"s exports minus the value of its imports; also called the trade balance. Trade surplus: an excess of exports over imports. If net exports are positive, exports are greater than imports, indicating that country sells more goods and services abroad than it buys from other countries. Trade deficit: an excess of imports over exports.

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Related Questions

An economy that has interactions in trade or finance with other economies is referred to as:
Ā 
A) A closed economy
B) A net foreign investment economy
C) A trade-balanced economy
D) An open economy

1. Use the long-run model developed in Chapter 6 to predict what would happen to imports, exports, trade balance, the real exchange rate, and the nominal exchange rate of a small open economy if domestic residents spend more vacations overseas. [3 points]

Exports of goods & services $1000
Imports of goods & services $800
The net change in assets owned abroad $590
The net change in foreign-owned assets at home $400
Unilateral transfers received $100
Unilateral transfers paid $200
Investment income paid to foreigners $300
Investment income received from foreigners $400
The balance on the capital account $0



1. The balance on the current account is A) $100. B) $200. C) 0. D) - $100

2. The balance on the financial account is A) -$90. B) -$190. C) $100. D) $200

3. The statistical discrepancy is A) -$5. B) $5. C) $10. D) -$10

4. From the domestic economy's perspective,

A) there is a net international capital inflow equal to $190.

B) there is a net international capital outflow equal to $190.

C) the net international capital flow is zero.

D) its domestic absorption exceeds its GNP by $200.