Open Exon Macro Concepts

Question 1

Trade balance

Answer 1

Same thing as net exports.

Question 2

Net capital outflow

Answer 2

The purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners

Question 3

Direct investment

Answer 3

An actively actively managed investment abroad

Question 4

Foreign portfolio investment

Answer 4

The American owner has a more passive role

Question 5

Influences of net capital outflow

Answer 5

The real interest rate paid in foreign assets
Real retest rate on domestic assets
Perceived economic and oil risk of holding assets abroad
Gov policies that affect foreign ownership of domestic assets

Question 6

Relationship between net exports, net capital outflow, savings and investment

Answer 6

S=Y-c-g
S= I + NX
S= I + NCO
In a closed economy, net capital is zero

Question 7

Trade deficit

Answer 7

Exports are less than imports. Net exports less than zero.

y

Question 8

Nominal exchange rate

Answer 8

Rate at which a person can trade currency if one currency for another

Question 9

Real exchange rate

Answer 9

(Nominal exchange rate x domestic price)/foreign price

Or
Foreign price x domestic / price index for foreign basket

Question 10

Purchasing power parity

Answer 10

Theory of exchange rates whereby a unit of any given currency should be able to buy the same quantity of goods in a country

Question 11

Arbitrage

Answer 11

Taking advantage of price differences for the same item in different markets

Question 12

And an open economy, government set praises real interest rates, crowds out domestic investment, causes the currency to appreciate, and pushes the trade balance toward deficit

Answer 12

Ha

Question 13

Net exports

Answer 13

Net exports– value of a nations imports minus exports

Question 14

Do trade policies affect trade balance?

Answer 14

No

Question 15

Capital flight

Answer 15

Large and sudden reduction in the demand for assets located in a country