Chapter 31

This chapter talks about open economy macroeconomics. We have already learned a lot about closed economics, but in open economics there is international trade where different economies interact with each other. One of the ten principles of economics is that trade makes everyone better off. Economies interact by buying and selling goods and services in world markets and buy buying and selling capitol assets in world financial markets. Net exports, a part of GDP, is calculated by subtracting imports from exports. A positive number means more exports than imports and a negative number means vice versa. If it is a negative number that is called a trade deficit.There are Many factors that influence exports and imports such as the tastes of consumers, prices of the goods, government policies, and incomes of consumers. The purchase of domestic assets by foreigners subtracted from the purchase of foreign assets by domestic residents equals the net capitol outflow. If NCO is positive, the domestic residents buy more foreign goods than foreigners are buying domestic goods so capital is flowing out of their country. If NCO is negative, domestic residents buy less foreign goods than foreigners buy domestic goods so capital flows into the country. I'd give this chapter a 1 out of 3. The new topic was pretty easy to understand since it's just the amount we import vs. export.