ECON202 Study Guide - Final Guide: Import Quota, Real Interest Rate, Vestment
16 Oct 2011
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In an open economy spending need not equal output saving need not equal investment. Ex = exports = foreign spending on domestic goods. Im = imports = c f + i f + g f = spending on foreign goods. Nx = net exports (a. k. a. the trade balance ) = ex im. Gdp = expenditure on domestically produced goods and services dfccc dfiii dfggg trade surpluses and deficits trade surplus: output > spending and exports > imports. Size of the trade surplus = nx trade deficit: spending > output and imports > exports. Y = c + i + g+ nx. Y c g = i + nx. Recall: s = y c g. Solve for nx: nx = s i. Trade balance = excess of savings over investment. Net capital outflow: = s i, = net outflow of loanable funds , = net purchases of foreign assets the country"s purchases of foreign assets minus foreign purchases of domestic assets.
