Difference between open economy and close economy. http://www.unitedworld.edu.in/

1. OPEN ECONOMY VS
CLOSED ECONOMY

2. THE ROLE OF NET
EXPORT

3. CAPITAL FLOWS AND
TRADE BALANCE.

4. SAVING AND
INVESTMENT(WORLD
INTEREST RATE)

5. If the economy were closed…
r
S, I
I (r )
S
rc
I
r
c S

( )
…the interest
rate would
adjust to
equate
investment
and saving:

7. FISCAL POLICY AT
HOME

9. FISCAL POLICY
ABROAD

11. SHIFT IN INVESTMENT
DEMAND

12. Figure 5.5 A Shift in the Investment
Schedule in a Small Open Economy

13. THE AMOUNT OF ONE
CURRENCY NEEDED TO BUY
ANOTHER CURRENCY.

14. NOMINAL EX RATES:-RELATIVE PRICE
OF TWO CURRENCY.
REAL EX RATES:-RELATIVE PRICE OF
THE GOODS OF TWO COUNTRY.IT
TELLS US THE RATE AT WHICH WE CAN
TRADE THE GOOD OF ONE COUNTRY
FOR THE GOOD OF ANOTHER.

15. REAL EXCHANGE RATE
NOMINAL EX RATE×PRICE OF DOMESTIC
GOOD/PRICE OF FOREIGN GOOD

16. REAL EXCHANGE RATE AND TRADE
BALANCE
NX=NX(€)

17. DETERMINATION OF
EXCHANGE RATE

18. DETERMINATION OF REAL
EXCHANGE RATE

19. Figure 5.8 How the Real
Exchange Rate is Determined

20. HOW POLICIES INFLUENCE
THE REAL EX RATE

21. Figure 5.9 The Impact of Expansionary Fiscal
Policy at Home on the Real Exchange Rate

23. SHIFT IN INVESTMENT
DEMAND

24. Figure 5.11 The Impact of an Increase in
Investment Demand on the Real Exchange Rate

25. THE EFFECT OF TRADE
POLICIES.

26. http://www.unitedworld.edu.in/
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