EC140 Chapter Notes - Chapter 12: Real Interest Rate, Interest Rate Parity, Open Economy
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EC140 Full Course Notes
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Closed economy - an economy that does not interact with other economies in the world. Open economy - an economy that interacts freely with other economies around the world. Exports - goods and services that are produced domestically and sold abroad. Imports - goods and services that are produced abroad and sold domestically. Net exports (or trade balance) - the value of a nation"s exports minus the value of its imports. Trade surplus - an excess of imports over exports. Trade deficit - an excess of exports over imports. Balanced trade - a situation in which exports equals imports. Net capital outflow - the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners. When nx > 0, the country is selling more goods & services to foreigners than it is buying from them. When nx < 0, the country is buying more goods & services to foreigners than it is buying from them.