Chapter 5

Question 1

What is imports?

Answer 1

C^f + I^f + G^f

Question 2

What is net export?

Answer 2

EX - IM

S - I

If S > I country is a net lender

S < I country is a net borrower

Question 3

In an open economy what is GDP comprised of?

Answer 3

Y = C + I + G + NX

Question 4

What is real exchange rate formula?

Answer 4

(e * P) / P*

e - nominal exchange rate (country 2 per country 1)

P - price in country 1

P* - price in country 2

Question 5

What is the purchasing power parity (PPP) equation?

Answer 5

e * P = P*

P - cost of basket of domestic goods in domestic currency

P* - cost of a basket of foreign goods in foreign currency