Reading 20: International Trade and Capital Flows Flashcards
National Income Identity for a Closed Economy
20.1
International Trade and Capital Flows
National Income Identity for an Open Economy
20.2
International Trade and Capital Flows
Current Account Balance
20.3
International Trade and Capital Flows
Disposable Income
20.4
International Trade and Capital Flows
Disposable income is equal to income plus transfers minus taxes
Disposable Income
(allocated to consumption and saving)
20.5
International Trade and Capital Flows
Disposable income is equal to consumption and saving
Consumption as Income Plus Transfers Minus Taxes and Savings
20.6
International Trade and Capital Flows
Current Account Balance Substituting Consumption as Income Plus Transfers Minus Taxes and Saving
20.7
International Trade and Capital Flows
Private and Government Saving as Related to Investment and Current Account Balance
20.8
International Trade and Capital Flows
Because (T-G-R) is taxes minus government spending and transfers, it is the government surplus, or put differently, government savings Sg,
CA = Sp - I + (T-G-R) can be restated as
Rearranged Sp equation
(and what it means)
20.9
International Trade and Capital Flows
It means:
An economy’s private savings can be used in three ways: (1) investment in domestic capital (I), (2) purchases of assets from foreigners (CA), and (3) net purchases (or redemptions) of government debt (-Sg)
Macroeconomic Sources of a Current Account Imbalance
20.10
International Trade and Capital Flows
A current account deficit tends to result from low private savings, high private investment, a governemnt deficit (Sg<0) or a combination of the three. Alternatively, a current account surplus reflects high private savings, low private investment, or a government surplus.
