Econ unit 6 vocab

closed economy

economy that doesn’t interact with other economies in the world.

Open economy

an economy that interacts freely with other economies around the world.

exports

goods and services that are produced domestically and sold abroad.

imports

goods and services produced abroad and sold domestically

net exports

spending on domestically produced goods by foreigners ( exports) minus spending on foreign goods by domestic residents (imports)

trade balance

The value of a nations exports minus value of its imports also called net exports.

trade deficit

excess of imports over exports.

Trade surplus

excess of exports over imports

balance trade

a structure in which exports equal imports.

net capital outflow.

purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners.

nominal exchange rate

The rate at which a person can trade the currency of one country for the currency of another

appreciation

an increase in the value of a currency as measured by the amount of foreign currency it can buy.

Real exchange rate

rate at which a person can trade goods and services of one country for goods and services of another.

purchasing power parity

theory of exchange rates whereby a unit of any given currency should be able to buy the same quantity of goods in all countries.

trade policy

a government policy that directly influences quantity of goods and services that a country imports or exports

Capital Flight

a large and sudden reduction in demand for assets located in a country.