ECON 114 Lecture Notes - Lecture 12: Purchasing Power Parity, Interest Rate Parity, Peseta

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10 Mar 2016
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One of the ten principles of economics highlighted in chapter 1 is that trade can make everyone beter of. 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. Exports: goods and services that are produced domesically and sold abroad. Imports: goods and services that are produced abroad and sold domesically. Net exports (or trade balance): the value of a naion"s exports minus the value of its imports. Trade surplus: an excess of exports over imports. Trade deicit: an excess of imports over exports. Balanced trade: a situaion in which exports equal imports. The flow of financial resources: net capital ouflow: Net capital ouflow: the purchase of foreign assets by domesic residents minus the purchase of domesic assets by foreigners. The equality of net exports and net capital ouflow: Net exports measure an imbalance between a country"s exports and its imports.

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