Macroeconomics Ch. 18 Definitions Flashcards
Closed Economy
An economy that does not interact with other economics in the world.
Open Economy
An economy that interacts freely with other economics in 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
The value of a nation’s exports minus the value of its imports; also called the trade balance.
Trade Balance
The value of a nation’s exports minus the value of its imports; also called net exports.
Trade Surplus
An excess of exports over imports.
Trade Deficit
An excess of imports over exports.
Balanced Trade
A situation in which exports equal imports.
Net Capital Outflow (NCO)
The purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners.
Nominal Exchange Rate
The rate at which a person can trade the currency of one country for the currency of another.
Appreciation
An increase in the value of a currency as measured by the amount of foreign currency it can buy.
Depreciation
A decrease in the value of a currency as measured by the amount of foreign currency it can buy.
Real Exchange Rate
The rate at which a person can trade the goods and services of one country for the goods and services of another.
Purchasing-Power Parity
A theory of exchange rates whereby a unit of any given currency should be able to buy the same quantity of goods in all countries.
