Macroeconomics 3: Adding Trade to the Long Run Model Flashcards
• The Circular Flow of Income for the open economy • Net Exports and the Savings/Investment balance • Net exports, current account and capital flows • Purchasing Power Parity as an explanation of the (Real) Exchange Rate
1
Q
Describe the circular flow of an economy including trade
A
- Housholds to:
1. Government via taxes
2. Financial Markets via private saving
3. Markets for Goods & Services via Consumption - Government to financial markets via public saving
- Markets for Factors of Production to Households via Income
- Financial Markets to Markets for Goods & Services via Investment
- Firms to Markets for Factors of Production via Factor Payments…
2
Q
A
