Small Open Economy Model Overview - Example with a Drop in Consumer Confidence - Intermediate Macro

Описание: In this first video, we overview the model for the small open economy. What are the determinants for net exports (the trade balances, capital flows), the real exchange rate, and the nominal exchange rate? We talk about trade surpluses, trade deficits, and the market for loanable funds. We also do an example where consumer savings increases, analyzing the effect on net exports and exchange rates.

More Intermediate Macro Video: https://sites.google.com/site/curtisk...


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Use the model of the small open economy to predict what would happen to the trade balance, the real exchange rate, and the nominal exchange rate in response to each of the following events.
a. A fall in consumer confidence about the future induces consumers to spend less and save more.
b. A tax reform increases the incentive for businesses to build new factories.
c. The introduction of a stylish line of Toyotas makes some consumers prefer foreign cares over domestic cars.
d. The central bank doubles the money supply.
e. New regulations restricting the use of credit cards increase the demand for money.

From Mankiw's Macroeconomics (Intermediate) 8th edition. Chapter 6 (The Open Economy), Problem 1
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