Open-Economy Macroeconomics: Basic Concepts
Open and Closed Economies
A closed economy is one that does not interact with other economies in the world.
There are no exports, no imports, and no capital flows.
An open economy is one that interacts freely with other economies around the world.
An open economy interacts with other countries in two ways.
It buys and sells goods and services in world product markets.
It buys and sells capital assets in world financial markets.
THE INTERNATIONAL FLOW OF GOODS AND CAPITAL
An Open Economy
The United States is a very large and open economy—it imports and exports huge quantities of goods and services.
Over the past four decades, international trade and finance have become increasingly important.
The Flow of Goods: Exports, Imports, Net Exports
The Flow of Financial Resources: Net Capital Outflow
The Equality of Net Exports and Net Capital Outflow
Saving, Investment, and Their Relationship to the International Flows
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1. What is an open economy in macroeconomics? |
2. What are the flows of goods and capital in an open economy? |
3. How do the flows of goods and capital impact the economy of a country? |
4. What are some examples of government policies that can influence the flows of goods and capital in an open economy? |
5. How does globalization impact the flows of goods and capital in an open economy? |
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