Macro workshop Assg2. Blanchard 18th

5  1    11 Datenblatt    dieppei
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Frage English Antworten English
determinants of imports
Lernen beginnen
Higher domestic income leads to a higher domestic demand for all goods, both domestic and foreign. So a higher domestic income leads to higher imports.
determinants of imports
Lernen beginnen
The more expensive domestic goods are relative to foreign goods—equivalently, the cheaper foreign goods are relative to domestic goods—the higher is the domestic demand for foreign goods. So a higher real exchange rate leads to higher imports.
trade deficit
Lernen beginnen
Movements in the real exchange rate were reflected in parallel movements in net exports. The appreciation was associated with a large increase in the trade deficit, and the later depreciation was associated with a large decrease in the trade balance.
trade deficit
Lernen beginnen
There were, however, substantial lags in the response of the trade balance to changes in the real exchange rate. Note how from 1981 to 1983, the trade deficit remained small while the dollar was appreciating
trade deficit cause
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The fundamental cause of a trade deficit is an imbalance between a country's savings and investment rates
real exchgane rate
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real exchange rate is the relative price of domestic goods in terms of foreign goods. It is equal to the nominal exchange rate times the domestic price level divided by the foreign price level.
true
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A small open economy can reduce its trade deficit through fiscal contraction at a smaller cost in output than can a large open economy.
true
Lernen beginnen
The experience of the United States in the 1990s shows that real exchange rate appreciations lead to trade deficits and real exchange rate depreciations lead to trade surpluses.
true
Lernen beginnen
A decline in real income can lead to a decline in imports and thus a trade surplus
Demand for domestic goods
Lernen beginnen
Demand for domestic goods refers to the total demand for the goods produced within a country's boundary by domestic producers. This demand is the sum of the goods demanded by the people within and outside the country. It is given by Z = C+I+G+(X-M)
Domestic demand for goods
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Domestic demand for goods refers to the quantity demanded goods within the country by its population. It is given by Z = C+I+G

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