Openness- goods market

Question 1

openness in goods market

Answer 1

ability of consumers and firms to choose between domestic and foreign goods.

Question 2

why is openness in a country never free of restrictions

Answer 2

tarrifs, quotas

Question 3

trade balance

Answer 3

difference between exports and imports

Question 4

trade surplus

Answer 4

X > M

Question 5

negative trade balance / trade deficit

Answer 5

M > X

Question 6

openness measures

Answer 6

proportion of aggregate output made up of tradable goods

Question 7

volume of trade as a measure of openness

Answer 7

not good, goods dont comepete in foreign market

Question 8

tradable goods

Answer 8

goods that compete w foreign good in domestic or foreign markets

Question 9

what determines consumer choice btw domestic or foreign good

Answer 9

real exchange rate

Question 10

fixed exchange rate

Answer 10

constant between 2 countries

Question 10

nominal exchange rate

Answer 10

price of domestic currency in terms of foreign

Question 11

revaluation

Answer 11

increase in fixed exchange rate

Question 12

devaluation

Answer 12

decrease in fixed exchange rate

Question 13

real exchange rate

Answer 13

price of domestic goods in terms of foreign goods

Question 14

real exchange rate formula

Answer 14

[domestic PL x nominal exchange rate] / foreign PL
EP/P*

Question 15

real appreciation

Answer 15

increase in real exchange rate

Question 16

real depreciation

Answer 16

decrease in real exch rate: decrease in P of domestic goods in terms of foreign

Question 17

how does nominal appreciation and real depreciation occur together (US & UK)

Answer 17

• E increase: $ went up in terms of £ (nominal appreciation)
• P/P* decrease: PL in US increased less than UK
• real depreciation: P/P* decrease > E increase

Question 18

bilateral exchange rate

Answer 18

value of one currency in terms of another

Question 18

multilateral exchange rate

Answer 18

value of one currency against more than one other currency.