Open Economy Macroeconomics Flashcards Preview

Macro Economics > Open Economy Macroeconomics > Flashcards

Flashcards in Open Economy Macroeconomics Deck (11)
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1
Q

When does a producer have an absolute advantage

A

When they can produce more unit per hour than other producers

2
Q

When does a producer have a comparative advantage

A

When the producer has a lower opportunity cost to produce their good compared to other producers

3
Q

What is a tariff

A

A government tax imposed on exports and imports of goods

4
Q

What is a trade surplus

A

When the trade balance is positive

5
Q

What is a trade defecit

A

When trade balance is negative

6
Q

What is the current account

A

The net flow of payments made to domestic residents from foreigners

7
Q

What is the financial account

A

increase in domestic assets held by foreigners minus the increase in foreign assets held domestically

8
Q

Define Nominal Exchange rate

A

the rate at which one countries currency can be exchanged for another countries currency

9
Q

What does a country do with a flexible exchange rate

A

the country does not intervene in the foreign exchange market

10
Q

What does a country do with a fixed exchange rate

A

the country sets a value and intervenes to maintain that value

11
Q

what is the forex market

A

The market where currencies are traded and nominal interest rates are determined