ECON 2010 Study Guide - Final Guide: Capital Account, Currency Appreciation And Depreciation, Purchasing Power Parity
Document Summary
Open economy- an economy that has interactions in trade or finance with other countries. Closed economy- an economy that has no interactions in trade or finance with other countries. Balance of payments- the record of a country"s trade with other countries in goods, services, and assets. Current account- the part of the balance of payments that records a country"s net exports, net income on investments, and net transfers. Balance of trade- the difference between the value of the goods a country exports and the value of the goods a country imports. Financial account- the part of the balance of payments that records purchases of assets a country has made abroad and foreign purchases of assets in the country. Net foreign investment- the difference between capital outflows from a country and capital inflows; If nfi is greater than 0, inflows is less than outflows. Problem: if capital outflows is greater than inflows, nfi is positive and national savings is increased.