Open Market operations Flashcards
how do countries interact with eachother?
through exports, imports and investments
what are exports and imports?
exports are produced domestically and sold abroad
imports are produced abroad and sold domestically
What are trade deficits and surpluses?
trade deficit: when imports > exports
trade surplus: when exports > imports
What is Net capital outflow?
NCO = net capital outflow - net capital inflow
NCO = NX
2 types of foreign investment
- direct investment - canadian business’s are run abroad and invest in another country
- foreign portfolio investment - investments in your country are funded by foreign countries
What is the Balance of payment made up of?
current account + capital account + changes in international reserves
where does the demand for loanable funds come from?
domestic investors + forign investers. NCO + I
when foreign investment increases, GDP for host country increases, the return rate for foreign country increases
where does the supply for loanable funds come from?
comes from savers that provide deposits