Comparison between open economy and close economy

3,015 views 26 slides Sep 30, 2014
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About This Presentation

Difference between open economy and close economy.
http://www.unitedworld.edu.in/


Slide Content

OPEN ECONOMY OPEN ECONOMY VS CLOSED ECONOMY

OPEN ECONOMY THE ROLE OF NET EXPORT

OPEN ECONOMY CAPITAL FLOWS AND TRADE BALANCE.

OPEN ECONOMY SAVING AND INVESTMENT (WORLD INTEREST RATE)

If the economy were closed… r S, I I ( r ) r c …the interest rate would adjust to equate investment and saving:

OPEN ECONOMY FISCAL POLICY AT HOME

OPEN ECONOMY FISCAL POLICY ABROAD

OPEN ECONOMY SHIFT IN INVESTMENT DEMAND

Figure 5.5 A Shift in the Investment Schedule in a Small Open Economy Mankiw: Macroeconomics, Sixth Edition Copyright © 2007 by Worth Publishers

EXCHANGE RATES THE AMOUNT OF ONE CURRENCY NEEDED TO BUY ANOTHER CURRENCY.

EXCHANGE RATES NOMINAL EX RATES:- RELATIVE PRICE OF TWO CURRENCY. REAL EX RATES:- RELATIVE PRICE OF THE GOODS OF TWO COUNTRY.IT TELLS US THE RATE AT WHICH WE CAN TRADE THE GOOD OF ONE COUNTRY FOR THE GOOD OF ANOTHER.

EXCHANGE RATES REAL EXCHANGE RATE NOMINAL EX RATE×PRICE OF DOMESTIC GOOD/PRICE OF FOREIGN GOOD

EXCHANGE RATES REAL EXCHANGE RATE AND TRADE BALANCE NX=NX(€)

EXCHANGE RATES DETERMINATION OF EXCHANGE RATE

EXCHANGE RATES DETERMINATION OF REAL EXCHANGE RATE

Figure 5.8 How the Real Exchange Rate is Determined Mankiw: Macroeconomics, Sixth Edition Copyright © 2007 by Worth Publishers

EXCHANGE RATES HOW POLICIES INFLUENCE THE REAL EX RATE

Figure 5.9 The Impact of Expansionary Fiscal Policy at Home on the Real Exchange Rate Mankiw: Macroeconomics, Sixth Edition Copyright © 2007 by Worth Publishers

EXCHANGE RATES SHIFT IN INVESTMENT DEMAND

Figure 5.11 The Impact of an Increase in Investment Demand on the Real Exchange Rate Mankiw: Macroeconomics, Sixth Edition Copyright © 2007 by Worth Publishers

EXCHANGE RATES THE EFFECT OF TRADE POLICIES.

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