Unit 6 Open Economy-International Trade and Finance
Unit 6.1 Balance of Payments Accounts
LEARNING OBJECTIVE: a. Define the current account (CA), the capital and financial account (CFA), and the balance of payments (BOP) b. Explain how changes in the components of the CA and CFA affect a country’s BOP c. Calculate the CA, the CFA, and the BOP
LEARNING OBJECTIVE: a. Define the exchange rate, currency appreciation, and currency depreciation b. Explain how currencies are valued relative to one another c. Calculate the value of one currency relative to another
LEARNING OBJECTIVE: a. Define the foreign exchange market, demand for currency, and supply of currency b. Explain (using graphs as appropriate) the relationship between the exchange rate and the quantity of currency demanded (supplied) c. Define (using graphs as appropriate) the equilibrium exchange rate d. Explain (using graphs as appropriate) how exchange rates adjust to restore equilibrium in the foreign exchange market
Unit 6.4 Effect of Changes on the Foreign Exchange Market
LEARNING OBJECTIVE: a. Explain (using graphs as appropriate) the determinants of currency demand and supply b. Explain (using graphs as appropriate) how changes in demand and supply in the foreign exchange market affect the equilibrium exchange rate
LEARNING OBJECTIVE: Explain (using graphs as appropriate) how changes in the value of a currency can lead to changes in a country’s net exports and aggregate demand
Unit 6.6 Real Interest Rates and International Capital Flows
LEARNING OBJECTIVE: Explain (using graphs as appropriate) how differences in real interest rates across countries affect financial capital flows, foreign exchange markets, and loanable funds markets
