Chapter 32

Slides

VNP-Econ-Chapter 32
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32-2b Simultaneous Equilibrium in Two Markets

We can now put all the pieces of our model together in Figure 4. This figure shows how the market for loanable funds and the market for foreign-currency exchange jointly determine the important macroeconomic variables of an open economy. Panel (a) of the figure shows the market for loanable funds (taken from Figure 1). As before, […]

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32-2a Net Capital Outflow: The Link between the Two Markets

We begin by recapping what we’ve learned so far in this chapter. We have been discussing how the economy coordinates four important macroeconomic variables: national saving (S), domestic investment (I), net capital outflow (NCO), and net exports (NX). Keep in mind the following identities: S  =  I  +  NCO and NCO = NX In the […]

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32-2 Equilibrium in the Open Economy

So far, we have discussed supply and demand in two markets: the market for loanable funds and the market for foreign-currency exchange. Let’s now consider how these markets are related to each other.

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32-1b The Market for Foreign-Currency Exchange

The second market in our model of the open economy is the market for foreign-currency exchange. Participants in this market trade U.S. dollars in exchange for foreign currencies. To understand the market for foreign-currency exchange, we begin with another identity from the last chapter:          NCO              […]

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32-1a The Market for Loanable Funds

When we first analyzed the role of the financial system in Chapter 26, we made the simplifying assumption that the financial system consists of only one market, called the market for loanable funds. All savers go to this market to deposit their saving, and all borrowers go to this market to get their loans. In […]

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32-1 Supply and Demand for Loanable Funds and for Foreign-Currency Exchange

To understand the forces at work in an open economy, we focus on supply and demand in two markets. The first is the market for loanable funds, which coordinates the economy’s saving, investment, and flow of loanable funds abroad (called the net capital outflow). The second is the market for foreign-currency exchange, which coordinates people […]

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