Chapter Twenty- Nine: The Global Economy and Policy.
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Transcript of Chapter Twenty- Nine: The Global Economy and Policy.
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Chapter Twenty-
Nine:
The Global Economy and
Policy
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Macroeconomics in a Global Context
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United States
World
Figure 29.1: Trade Expressed as a Percentage of Production, World and the United States, 1960-2010
Source: World Development Indicators, World Bank, 2012.
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Figure 29.2: Top Purchasers of Goods from the United States and Suppliers of Goods to the United States, 2012
Source: U.S. Census Bureau, Foreign Trade Statistics, Top Trading Partners, 2012.
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The Trade Balance: Completing the Picture
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Output (Y) Income (Y)
Spending (AD)
Exports (X)
Government spending (G)
Intended investment (II)
Imports (IM)
Consumption (C)
Savings (S)
Taxes (T)
Production generates income to
householdsleakages
injections
Figure 29.3: Leakages and Injections in a Complete Macroeconomic Model
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International Finance
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Quantity of Dollars
Eu
ros
per
Do
llar E
D
S
Figure 29.4: A Foreign Exchange Market
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Quantity of Dollars
Eu
ros
per
Do
llar
D
S1
E1
S2
Depreciation of the Dollar
E2
Figure 29.5: A Supply Shift in a Foreign Exchange Market
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Table 29.1: U.S. Balance of Payments Account (2011, billions of dollars)
Source: U.S. Bureau of Economic Analysis, U.S. International Transactions Accounts Data, table 1, with rearrangements and simplifications by authors.*Also includes the net value of financial derivatives (financial instruments whose values are linkedto an underlying asset, interest rate, or index, such as futures or options).
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Figure 29.6: U.S. Imports and Exports of Goods and Services, 1960-2012
Source: BEA NIPA Tables 4.1 and 1.1.5
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Macroeconomics in an Open Economy
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Expansionary monetary policy
Lowers interest rates
Investment is encouraged
Aggregate demand rises
Equilibrium GDP rises
Reduces capital inflows
Reduces demand for dollars, leading to depreciation
Reduces imports and increases exports
![Page 14: Chapter Twenty- Nine: The Global Economy and Policy.](https://reader035.fdocuments.us/reader035/viewer/2022062719/56649ec15503460f94bcdc81/html5/thumbnails/14.jpg)
Quantity of the Domestic Currency
Un
its
of
Fo
reig
n E
xch
ang
e
Per
Un
it o
f D
om
esti
c C
urr
ency
Dmarket
e*
Smarket
Dwith intervention
Surplus without intervention
Figure 29.7: Foreign Exchange Intervention