1. Chapter Twenty- Nine: The Global Economy and Policy

2. Macroeconomics in a Global Context

3. United States World Figure 29.1: Trade Expressed as a Percentage of Production, World and the United States, 1960-2010 Source: World Development Indicators, World Bank, 2012.

4. Figure 29.2: Top Purchasers of Goods from the United States and Suppliers of Goods to the United States, 2012 Source: U.S. Census Bureau, Foreign Trade Statistics, Top Trading Partners, 2012.

5. The Trade Balance: Completing the Picture

6. Output (Y) Income (Y) Spending (AD) Exports (X) Government spending (G) Intended investment (I I ) Imports (IM) Consumption (C) Savings (S) Taxes (T) Production generates income to households leakages injections Figure 29.3: Leakages and Injections in a Complete Macroeconomic Model

7. International Finance

8. Quantity of Dollars Euros per Dollar E D S Figure 29.4: A Foreign Exchange Market

9. Quantity of Dollars Euros per Dollar D S1S1 E1E1 S2S2 Depreciation of the Dollar E2E2 Figure 29.5: A Supply Shift in a Foreign Exchange Market

10. Table 29.1: U.S. Balance of Payments Account (2011, billions of dollars) Source: U.S. Bureau of Economic Analysis, U.S. International Transactions Accounts Data, table 1, with rearrangements and simplifications by authors. *Also includes the net value of financial derivatives (financial instruments whose values are linkedto an underlying asset, interest rate, or index, such as futures or options).

11. Figure 29.6: U.S. Imports and Exports of Goods and Services, 1960-2012 Source: BEA NIPA Tables 4.1 and 1.1.5

12. Macroeconomics in an Open Economy

13. Expansionary monetary policy Lowers interest rates Investment is encouraged Aggregate demand rises Equilibrium GDP rises Reduces capital inflows Reduces demand for dollars, leading to depreciation Reduces imports and increases exports

14. Quantity of the Domestic Currency Units of Foreign Exchange Per Unit of Domestic Currency D market e* S market D with intervention Surplus without intervention Figure 29.7: Foreign Exchange Intervention