trade surplus, balanced trade, or trade deficit:
X < IMdeficittrade surplus, balanced trade, or trade deficit:
NX > 0surplustrade surplus, balanced trade, or trade deficit:
NX = 0balancedtrade surplus, balanced trade, or trade deficit:
NX < 0deficittrade surplus, balanced trade, or trade deficit:
S > Isurplustrade surplus, balanced trade, or trade deficit:
S = Ibalancedtrade surplus, balanced trade, or trade deficit:
S < Ideficittrade surplus, balanced trade, or trade deficit:
I > Sdeficittrade surplus, balanced trade, or trade deficit:
I < Ssurplustrade surplus, balanced trade, or trade deficit:
S - I > 0surplustrade surplus, balanced trade, or trade deficit:
S - I = 0balancedS - I < 0deficitworld interest rater*C =C(Y - T)I =I(r)small open economy: trade balance
NX =S̅ - I(r*)saving (S) depends on ___fiscal policyG↓: then S↑G↑: then S↓T↓: then S↓T↑: then S↑G↑:
S___
I___
NX___
trade ___↓(shifts left), same, ↓, deficitr*↑:
S___
I___
NX___
trade ___same, ↓, ↑, surplusinvestment demand↑:
I___
S___
NX___↑(shifts right), same, ↓the exchange rate between two countries is also known as the ___nominal exchange ratea rise in the exchange rate, say from 100 to 110 yen per dollar, is called an ___ of the dollarappreciationa fall in the exchange rate, say from 110 to 100 yen per dollar, is called a ___ of the dollardepreciationwhen the domestic currency appreciates, it buys ___ of the foreign currencymorewhen the domestic currency depreciates, it buys ___ of the foreign currencylessthe relative price of the goods of two countriesreal exchange ratetells us the rate at which we can trade the goods of one country for the goods of anotherreal exchange ratereal exchange rate =
in words(nominal exchange rate × price of domestic good) / price of foreign goodε =e × (P/P*)
(P = price of domestic good)
(P* = price of foreign good)ε↑:
foreign goods are ___
home goods are ___cheap, expensiveε↓:
foreign goods are ___
home goods are ___expensive, cheapNX is a function of ___ε
(NX = NX(ε))ε↓:
NX___↑ε↑:
NX__↓S*↓:
r*__↑S*↑:
r*___↓e =ε × (P*/P)∆e/e =∆ε/ε + (π* - π)
