ECON 345 Chapter Notes - Chapter 3: Capital Control
Document Summary
Important definitions and their relationship: trade balance in period n, tbn = qn - cn. The exogenous variables and how they are determined: parallel between hh and country. Budget constraint: for hh, it reflects the aggregate (and individual) lifetime budget constraints. As for at country-level, it reflects, the nation"s inter temporal resource constraint: many ways to write country"s inter temporal resource constraint. Method 1 (in terms of trade balance): Method 2 (in terms of current account): Section 3. 2: temporary versus permanent shock to income. Jump to page 69 (79) for the in-application overview. The changing assumptions of goods for consumption and exported (endowed) Recap the parallel between equation 3. 4 and the one used in this section. Parallel of: substitution effect: individual substitute consumption with saving, income effect, so, when r* , c1 , tb1 improves and ca1 improves, so, when r* , c1 , tb1 deteriorates and ca1 deteriorates.
