Ch 31-32 Flashcards
An economy that does not interact with other economies in the world
Closed economy
An economy that interacts freely with other economies around the world
Open economy
The value of a notations exports minus the value of its imports
Aka trade valence
Net exports
An excess of exports over imports
Trade surplus
An excess of imports over exports
Trade deficit
A situation in which exports equal imports
Balanced trade
The purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners
Net capital outflow
The rate at which a person can trade the correctly of one country for the currency of another
Nominal exchange rate
An increase in the value of a currency as measured by the amount of foreign currency it can buy
Appreciation
A decrease in value of a currency as a measured by the amount of foreign currency it can buy
Depreciation
The rate at which a person can trade the goods and services of one country for the goods and services of another
Real exchange rate
A theory of exchange rates whereby a unit of any given currency should be able to buy the same quantity of goods in all countries
Purchasing power parity
A government policy that directly influences the quantity of goods and services that a country exports and imports
Trade policy
A large and sudden reduction in the demand for assets located in a country
Capital flight
