Class notes Introduction to Economics Principles of Economics, ISBN: 9781305585126

Chapter 31
Basic Concepts of Open Economy Macroeconomics



trade can make better off
everyone
Open economy economy that interacts freely wish other
economies all over the world

Factors that might influence expern impern and NX
consumers preferences forforeign domestic goods
prices of goods at home abroad
exchange raten

incomes
transportation earn

government policies


Trade Surplus IN Xt Trade Deficit NX
INSET
Y DienenSpending Y DienenSpending
Ct It G Ct It G
5 I S I
Neo o N o



Balanced Trade E M NX o



Net Capital Outflow NW



II

, Purchase of foreign assets bydomestic residents
Nee
Purchase of domestic amen by foreigners

N so capital outflow
NW O Capital inflow


Variablen to Influence NW
real interest rates paid on domestic foreign assets
perceived risks of holding foreign amen
government policies affecting foreign ownership of dem einen




the men important
Neo N
accounting policy in maeroeeon


Every transition that affects NX also affects NW vice versa




Open economy Y Ct It Gt NX
National saving S Y C G
Y C G It NX
Sz It NX
NX NW
9 It NEO

Saving Domestic Investment t Net capital outflow