MGEC61H3 Lecture : Chapter_13 - The Balance of Payments.pdf
Document Summary
International finance is a study of problems and policies of an open economy. International finance studies the issues like unemployment, savings, trade imbalances, money and price levels (include exchange rates). Fixed exchange rate chapter 18: international macroeconomic policy chapters 19 & 21. Arguments for and against flexible exchange rates chapter 19. Arguments for and against common currency chapter 21. Chapter 13: national income accounting and the balance of payments. The national income identity for an open economy. The national income identity for an open economy is: Output (y) = c + i + g + (ex im) A country"s current account (ca) balance shows the difference between exports of goods and services and imports of goods and services (including net income on foreign investments), plus net unilateral transfer. Ca = ex im + net unilateral transfer. Foreign aid received foreign aid gave out. If net unilateral transfer = zero, ca = ex im, then: