Term
|
Definition
| The sum of goods and services provided by U.S citizens in one fiscal year |
|
|
Term
| (CE ) Expenditure Side of GNP |
|
Definition
Y= C+Ip+G
Disposable income = Consumption+Private InVestment+ Government Expenditure |
|
|
Term
| (CE) Income Approach to GNP |
|
Definition
Y=C+Sp+T
Disposable Income=Consumption+Private Savings+Taxes |
|
|
Term
| (CE) Setting Income Equal Expenditure |
|
Definition
|
|
Term
| (CE) Equilibrium in a Closed Market |
|
Definition
G-T=Sp-Ip
Public Budget= Kapital Account |
|
|
Term
|
Definition
|
|
Term
|
Definition
|
|
Term
|
Definition
|
|
Term
|
Definition
Ip=Sp+(G-T)
=Private saving + Public budget
Private is a func of Int Rate- i up/ Ip down, i down/Ip up |
|
|
Term
| Equilibrium in an Open Economy |
|
Definition
| Public budget = Kapital account + Current account |
|
|
Term
|
Definition
X>M - Trade surplus
XY up/X up,
Y up/M down |
|
|
Term
|
Definition
| Sum of all goods and services by US citizens here and abroad |
|
|
Term
|
Definition
| Ip+ Publice budget - current account |
|
|
Term
| (OE) Private Investment = |
|
Definition
| Private savings+ public budget-current account |
|
|
Term
|
Definition
| Pd/Pf
Absolute purchasing power = is the ratio of domestic price level over the foreign price level
E>1 then Pd>Pf
E<1 then Pd |
|
|
Term
|
Definition
|
|
Term
|
Definition
Goods are not homogenous
Missing or redundant goods
Taxes
Demand for characteristics
Politics |
|
|
Term
|
Definition
Identical goods should command identical pricegiven the level of exchange rate
~
E (Pf)=Pd |
|
|
Term
|
Definition
| Deviations in the law of one price occur due to taxes and financial reasons. |
|
|
Term
|
Definition
Relative purchasing power Parity
^ ~ ~
E= IId - IIf,
Estimated Exchange Rate = Inflation rate differential |
|
|
Term
|
Definition
^
E=id-if
Estimated exchange rate = Interest rate differential |
|
|
Term
|
Definition
International Fisher due Equation
Interest Rate Differential = Inflation rate differential |
|
|
Term
|
Definition
id=if+(Inflation rate Dif)
As inInflation rate dif UP:id UP, if UP : id UP |
|
|
Term
|
Definition
| The capital acount will become positive due to the flight of quality, investors will invest in other places causing the U.S Ip to go down |
|
|
Term
|
Definition
| if=id-( Infaltion rate dif) |
|
|
Term
|
Definition
|
|
Term
|
Definition
estimated exchange rate-actual exchange rate/ actual exchange rate
IF new exchange rate is higher then the currency is trading at a forward premium, if lower then forward discount
for a forward rate of more then a year
2
(1+1d/1+If) |
|
|
Term
|
Definition
| Investors are indifferent of where to invest because the returns are identical in both countries |
|
|
Term
|
Definition
| Equal to the sum of the price vector multiplied by the quantity vector |
|
|
