305_PPT_WK13.1-CH18_STUDENT_F24

Open Economy

An economy that interacts freely with other economies around the world, including trade and capital flows.

Net Exports (NX)

The value of a country's exports minus its imports.

Demand Shock

A sudden, unexpected change in the demand for goods and services in an economy.

Fluctuations in Domestic Output

Variations in the production levels of goods and services within a country, often influenced by changes in demand.

Total Domestic Demand

The total demand for domestic goods, calculated as C + I + G, which also includes net exports.

Multiplier Effect (β)

The ratio of change in national income to the change in government spending; represents the impact of fiscal policy.

Trade Balance

The difference between a country's exports and imports, indicating either a trade surplus or deficit.

Expansionary Fiscal Policy

A policy aimed at increasing output and economic activity, typically through increased government spending.

Real Exchange Rate (ε)

The value of a currency against another currency, adjusted for inflation and used to gauge trade competitiveness.

Foreign Demand (Y*)

The demand for a country's goods and services from foreign consumers and businesses.