The Open Economy: International Trade and Finance C+I+G+(X-M)

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Presentation transcript:

The Open Economy: International Trade and Finance C+I+G+(X-M)

Trade Balance American Exports In 2013 $1.579 T Machinery: $213,108,199,000 (13.5% of total exports) Electronic equipment: $165,604,449,000 (10.5%) Mineral fuels including oil: $148,426,743,000 (9.4%) Vehicles excluding trains and streetcars: $133,640,479,000 (8.5%) Aircraft and spacecraft: $115,380,944,000 (7.3%) American Imports In 2013 $2.330 T Oil $389,300,000,000 (16.7% of total imports) Machinery $311,200,000,000 (13.4%) Electronic Equipment $303,500,000,000 (13%) Vehicles $253,300,000,000 (10.9%) Medical and Technical Equipment $72,100,000,000 (3.1%)

Current Trade Deficit in November 2014 was -$39 B

Why does the USA trade?

Comparative Advantage ProductCountry ACountry B Wheat20050 TVs10050

Current Account page #412 Balance of payments on goods and services plus net international transfer payments and factor income

Capital (Financial) Accounts

Current account + Capital account = 0

Too much too fast!!

Lets break this down a bit. Try Khan Academy k7A&list=PLAEA5E9ACA1508F92 k7A&list=PLAEA5E9ACA1508F92

Inflows and Outflows Under what conditions will more foreign currency come into the nation?

Impact on Credit Market

Strength of Currency An Appreciating Dollar an increase in the amount of another nation’s currency one’s nation can buy A Depreciating Dollar A decrease in the amount of another nation’s currency one’s nation can buy

The FOREX Graph

Why supply and demand shift. Supply Change in a nation’s price level Open Market Operations Demand Change in consumer preferences Change in real interest rates Change in productivity Perceptions of Economic Stability