Details Title: 1051H Chapter 31 Description: Gregory Mankiw Textbook Definitions. Jeffrey Milyo's Class Total Flash Cards: 20 Created: 11/05/2008 09:25:05		New Users: To study from this flashcard set, or to create your own your own study flash cards, REGISTER HERE. Existing Users: CLICK HERE. Additional Economics Flashcards
Cards in this set: Term closed economy Definition an economy that does not interact with other economies in the world Term open economy Definition an economy that interacts freely with other economies around the world Term exports Definition goods and services that are produced domestically and sold abroad Term imports Definition goods and services that are produced abroad and sold domestically Term net exports Definition the value of a nation's exports minus the value of its imports; also called the trade balance Term trade balance Definition the value of a nation's exports minus the value of its imports; also called net exports Term trade surplus Definition an excess of exports over imports Term trade deficit Definition an excess of imports over exports Term balanced trade Definition a situation in which exports equal imports Term net capital outflow Definition the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners, Net capital outflow = net exports Term nominal exchange rate Definition the rate at which a person can trade the currency of one country for the currency of another Term appreciation Definition the increase in the value of a currency as measured by the amount of foreign currency it can buy Term depreciation Definition a decrease in the value of a currency as measured by the amount of foreign currency it can buy Term real exchange rate Definition the rate at which a person can trade the goods and services of one country for the goods and services of another Term purchasing-power parity Definition a theory of exchange rates whereby a unit of any given currency should ber able to buy the same quantity of goods in all countries Term parity Definition equality Term purchasing power Definition the value of money in terms of the quantity of goods it can buy Term What happens when central bank prints large quantities of money? Definition that money loses value both in terms of the goods and services it can buy and in terms of the amount of other currencies it can buy Term according to theory of purchasing-power parity Definition the nominal exchange rate between the currencies of two countries must reflect the price levels in those countries Term if purchasing power of dollar is always same at home and abroad Definition the real exchange rate cannot change