ECO 1102 Study Guide - Openmarket, Overnight Rate
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ECO 1102 Full Course Notes
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2012 03 13: an economy"s net capital outflow always equals its net exports, an economy"s saving can be used to either finance investment at home or to buy assets abroad, the nominal exchange rate is the relative price of the currency of two countries, the real exchange rate is the relative price of the goods and services of two countries, when the nominal exchange rate changes so that each dollar buys more foreign currency, the dollar is said to appreciate or strengthen, when the nominal exchange rate changes so that each dollar buys less foreign currency, the dollar is said to depreciate or weaken, according to the theory of purchasing power parity, a unit of currency should buy the same quantity of goods in all countries, the nominal exchange rate between the currencies of two countries should reflect the countries" price levels in those countries.
