This website uses cookies to ensure you have the best experience. Learn more

Open Economy Macroeconomics Notes Essay

1109 words - 5 pages

Ch28 “Open-Economy Macroeconomics”

Imports goods and services produced abroad and consumed domestically
Exports goods and services produced domestically and purchased by foreigners
Net exports defined as exports of goods and services minus imports of goods and services
Net foreign investment counterpart of net exports
* Denotes net US savings abroad and is approximately equal to the value of net exports
Domestic expenditures equal to consumption plus domestic investment plus government purchases

* The volume and value of imports will be affected by domestic output and the relative prices of domestic and foreign goods
Marginal ...view middle of the document...

In this case, domestic investment crowds out foreign investment
* an increase in world interest rates will reduce the level of investment. This will lead to an increase in the difference between saving and investment, to a depreciation in the foreign exchange rate, and to an increase in net exports and foreign investment (this would be a shift along the investment schedule)
* integration of a country into the world economy adds an important new dimension to macroeconomic performance and policy
* the foreign sector provides an important source of domestic investment and a potential outlet for domestic saving
* higher saving at home--- whether in the form of higher private saving or higher public saving will lead to higher net exports
* a country’s trade balance is primarily a reflection of its national saving and investment balance rather than of its absolute productivity or wealth
* adjustments in a country’s trade accounts require a change in domestic saving or investment
* in the long run, adjustments in trade accounts will be brought about by movements in the country’s relative prices, often through exchange-rate changes
Stable macroeconomic climate taxes are reasonable and predictable and that inflation is low, so lenders need not worry about inflation confiscating their investments
* promoting economic growth in an open economy involves ensuring that business is attractive for foreign and domestic investors who have a wide array of investment opportunities in the world economy. The ultimate goals of policy are to have high rates of saving and investment in productive channels and to ensure that businesses use best-practice techniques. Achieving these goals involves setting a stable macroeconomic climate, guaranteeing dependable property rights for both tangible investments and intellectual property, providing exchange-rate convertibility that allows investors to take home their profits, and maintaining confidence in the political and economic stability of the country

Competitiveness refers to the extent to which a nation’s goods can compete in the marketplace; this depends...

Other Papers Like Open-Economy Macroeconomics Notes

Macroeconomics Essay

699 words - 3 pages Running Head: Macroeconomics Jaque Mcilwain August 9, 2012 Morales Macroeconomics Class Thursday 6pm Abstract I will be discussing the two types of circular flow diagrams: One that represents the flows in the macro-economy as closed system and one that represents the flow as an open system. Circular Flow Diagrams. Circular flow diagrams are an economic model that illustrates the way a countries money flows or the way a country

Exam#1 Essay

324 words - 2 pages ? 8 Why might a banking crisis lead to a decrease in the money multiplier? 9 Suppose the velocity of money in an economy is growing steadily because of financial innovation, how would that affect the inflation rate? Explain it with the quantity equation. 10 Explain the connection between the nominal exchange rate and the real exchange rate. 11 What will happen to the trade balance and the real exchange rate of a small open economy when

Understanding and Application of Economics

992 words - 4 pages demand; elasticity; markets and welfare; externalities, public goods and common resources; cost of production; firms in competitive markets; monopolistic competition. However, the macroeconomics study on the real economy in the long run; money and prices in the long run; the macroeconomics of open economy and short-run economic fluctuations. From the point of view of economic origin, Adam Smith described the “invisible hand” metaphor in the 1700s


782 words - 4 pages Macroeconomics BE-202 Exchange Rate Determination and Open Economy Macroeconomics Recall fiscal policy mainly works through consumption spending (C) and government spending (G). Monetary policy has a major impact on investment spending (I). Question: What is the major factor influencing net export? 1. Exchange Rates An exchange rate is the # of units of one currency trading for one unit of another currency. Example: Assume that

The Procedures Motivating Hong Kong and Singapore’s Economic Business

611 words - 3 pages involvement is obvious in the management of the economy and its businesses. Its main influences of production are land, labor and capital resources. This groundbreaking and exceedingly prosperous economy where together the open market and the state have evenly resilient parts in the government is named the Singapore Model (, 2012). The Singapore Model was established out of necessity. In order for businesses to function successfully in

Weekly Reflection 3

1081 words - 5 pages Weekly Reflection Macroeconomics is a fascinating area of study. Students of economics learn about economic interactions between households, business, and government. They study gross domestic product and the effect inflation and unemployment has on the aggregate economy. Students add to their vocabularies terms, such as Keynesian, money wealth effect, and the principle of increasing marginal opportunity. They ponder issues, such as if a

The Federal Reserve

803 words - 4 pages properly they work in favor of the situations at hand. The Federal Reserve is doing their best to keep our economy healthy and at a balance. It is always coming up with solutions to keep the money supply where it needs to be to keep us from drastic inflations and to keep us out of recessions. References Colander, D. C. (2010). Macroeconomics (8th ed.). Boston, MA: McGraw-Hill/Irwin. www.http//

Corp Finance

845 words - 4 pages Lectures Notes I. Economic and financial analysis of an ever-changing system A. Economics is about how society decides what gets produced, how it gets produced and who gets what. B. Microeconomics studies about individual decision making units. Macroeconomics deals with aggregate or total behavior of all households and firms. C. Finance is about how the financial system coordinates the flow of funds from lenders to borrowers

Triffin Paradox

2426 words - 10 pages “HOLD YOUR POCKET OPEN” Inc., or The small recipe for the GLOBAL ECONOMIC CRISIS WHAT’S THE PROBLEM? (No brainwashing ) The Triffin dilemma (or the Triffin paradox) is a theory that when a national currency also serves as an international reserve currency, there could be conflicts of interest between short-term domestic and long-term international economic objectives. This dilemma was first identified by Belgian-American economist Robert

Macro Notes

1258 words - 6 pages less of something * Microeconomics: branch of economics that focuses on the choices made by individual decision-making units in the economy and the impacts those choices have on individual markets * Macroeconomics: branch of economics that focuses on the impact of choices on the total or aggregate level of economic activity * Variable: something whose value can change * Constant: something whose value does not change

Aggregate Demand and Supply Models

1365 words - 6 pages policies as leaders try to sustain a variant economy to which our country’s well being depends on. References Colander, D.C. (2010). Macroeconomics (8th ed.) Boston, MA: McGraw-Hill/Irwin. The White House. (2013). Reform & Fiscal Responsibility. Retrieved from The White House (2013) Jobs & The Economy: Putting America Back to Work. Retrieved May 25, 2013 from Bureau of Labor Statistics, 2013. Retrieved from Aggregate demand, Retrieved from

Related Essays

Macro Management Essay

4663 words - 19 pages place in the broad context of the macro economy. Hence, an understanding of factors that influence the overall economy is essential for managers. Macroeconomics course provides an introduction to the language and data of aggregate economy. This course is designed to give the students a clear understanding of the basic concepts and macroeconomic policy issues. This course would also provide analytical tools for macroeconomic analysis. This course

International Trade And Finance Speech

2279 words - 10 pages | | |Principles of Macroeconomics | Copyright © 2012, 2008, 2007, 2006 by University of Phoenix. All rights reserved. Course Description This course provides students with the basic theories, concepts, terminology, and uses of macroeconomics. Students learn practical applications for macroeconomics in their personal and

Macroeconomics: The Study Of Our National Economy

1230 words - 5 pages Macroeconomics: The Study of Our National Economy Macroeconomics: The study of Our National Economy “Our new economic approach is rooted in ideas which stress the importance of macro-economics, post neo-classical endogenous growth theory and the symbiotic relationships between growth and investment, and people and infrastructure”. (Brown) As we have seen here in the past few years, but more so in the

Macro Economy Systems Essay

1012 words - 5 pages Macro Economy Systems Macroeconomics AIU Online Abstract In the following paper, I will be discussing the open and closed system of the two circular diagram presented in my textbook. I will explain what a closed system and open system is and provide examples for the both. Next, I will discuss the inner and outer flows of both systems. Then I will define the leakage and injections in an open system. Lastly, I will provide personal