ECON102 Chapter Notes - Chapter 12: Foreign Portfolio Investment, Capital Outflow, Real Interest Rate

• School: University of Alberta
• Department: Economics
• Course: ECON102
• Professor: Andrew Wong

Document Summary

One of the ten principles of economics from chapter 1: This chapter introduces basic concepts of international macroeconomics: A closed economy does not interact with other economies in the world. An open economy interacts freely with other economies around the world. It buys and sells goods and services in world product markets. It buys and sells capital assets in world financial markets. Net exports (nx), aka the trade balance. = value of exports value of imports. Consumers" preferences for foreign and domestic goods. Prices of goods at home and abroad. Incomes of consumers at home and abroad. The exchange rates at which foreign currency trades for domestic currency. Nx measures the imbalance in a country"s trade in goods and services. Net capital outflow (nco): domestic residents" purchases of foreign assets minus foreigners" purchases of domestic assets. Nco is also called net foreign investment.