Chapter 18 - Open-Economy Macroeconomics: Basic Concepts

Appreciation

________- An increase in the value of a currency as measured by the amount of foreign currency it can buy.

Depreciation

________- a decrease in the value of a currency as measured by the amount of foreign currency it can buy.

nominal exchange rate

The ________ between the currencies of two countries must reflect the price levels in those countries.

government policies

The ________ that affect foreign ownership of domestic assets.

Net capital outflow

________- the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners.

domestic investment

When a nations saving exceeds its ________, its net capital outflow is position, indicating that the nation is using some of its savings to buy assets abroad.

Trade

________ surplus- the excess of exports over imports**

Trade balance

________- the value of a nations exports minus the value of its imports; also called net exports.

Nominal exchange rate

________: the rate at which a person can trade the currency of one country for the currency of another.