ECN 204 Lecture Notes - Capital Accumulation, Mexican Peso, Capital Flight
1 May 2012
School
Department
Course
Professor
Document Summary
The previous chapter explained the basic concepts and vocabulary of the open economy: net exports (nx), net capital outflow (nco), and exchange rates. This chapter ties these concepts together into a theory of the open economy. We will use this theory to see how gov"t policies and various events affect the trade balance, exchange rate, and capital flows. All savers go to this market to deposit their savings and all borrowers go to this market to get their loans. In this market this is only one interest rate, which is both the return to saving and the cost of borrowing. The identity emphasized that in an open economy, the amount that a nation saves does not have to equal the amount it spends to purchase domestic capital. In an open economy, the curve shows the canadian savings available at each interest rate.
