CH 13 PRACTICE PROBLEMS

CHAPTER 13 PROBLEMS

1) Write the equation for GDP for: a) a closed economy, b) an open economy

a) Y= C + I + G
b) Y = C + I + G +NX

2) What is the meaning and significance of the equation that NCO = NX?

Net capital outflow = net exports

If a country exports (sells) more goods than it imports (buys), it has a trade surplus, NX is positive. This means that Net Capital Outflow is positive.

If a country imports (buys) more goods than it exports (buys) it has a trade deficit, NX is negative, and NCO is also negative.