AS.180.101 Lecture Notes - Lecture 22: Current Yield, Autarky, Exchange Rate
Document Summary
Closed economy not caring about exports/imports, not caring about foreign buyers investing in your stocks. Us is certainly a large economy but we cannot call it a closed economy on the trade front: trade has influenced enormously macroeconomy in the last 10-15 years. You do not have compete control in affecting your interest rates because foreigners affect this: so, janet yellen"s control is a bit limited! Foreign purchasers and sellers can influence the rates in directions she doesn"t want. Example: 2003-2006: greenspan tried to tried up ont eh brake and raise rates by selling t- bills but china, russia, brazil were buying t-bills so rates were effected in unfavorable ways: greenspan"s conundrum . We must think about the macroeconomy in a global context. Services-flows flow between nations: we are a great exporter of services because of our business in banking and credit card uses; we process credit cards, people pay us, we also import services.
