Chapter 13 - Open-Economy Macroeconomics: Basic Concepts Flashcards
Open Economy
An open economy is an economy that interacts freely with other economies around the world.
Closed Economy
A closed economy is an economy that does not interact with other economies in the world.
Exports
Exports are goods and services that are produced domestically and sold abroad.
Imports
Imports are goods and services that are produced abroad and sold domestically.
Net Exports
Net exports are the value of a nation’s exports minus the value of its imports; this is also called the trade balance.
Trade Balance
The trade balance is the value of a nation’s exports minus the value of its imports; this is also called net exports.
Trade Surplus
A trade surplus is an excess of exports over imports.
Trade Deficit
A trade deficit is an excess of imports over exports.
Balanced Trade
Balanced trade is a situation in which exports equal imports.
Net Capital Outflow
Net capital outflow is the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners.
Nominal Exchange Rate
The nominal exchange rate is the rate at which a person can trade the currency of one country for the currency of another.
Appreciation
Appreciation is an increase in the value of a currency as measured by the amount of foreign currency it can buy.
Depreciation
Depreciation is a decrease in the value of a currency as measured by the amount of foreign currency it can buy.
Real Exchange Rate
The real exchange rate is the rate at which a person can trade the goods and services of one country for the goods and services of another.
Purchasing Power Parity
Purchasing-power parity is 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.
