ECON 1000 Chapter Notes - Chapter 12: Real Interest Rate, Xm Satellite Radio, Autarky
29 Nov 2017
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Closed/open economy: 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. The flow of goods: x, m, nx: exports (x): g&s that are produced domestically and sold abroad. If net exports are positive, exports are greater than imports, indicating that the country sells more goods and services abroad than it buys from other countries. (trade surplus) If net exports are negative, exports are less than imports, indicating that the country sells fewer goods and services abroad than it buys from other countries. (trade deficit) If net exports are zero, its exports and imports are exactly equal, and the country is said to have balanced trade. Capital is said to be flowing out of the country: when the net capital outflow is negative, domestic residents are buying less foreign assets than foreigners are buying domestic assets.
