ECON 102 1st Edition Lecture 33 Outline of Last Lecture 1 Short Run Phillips Curve Cont 2 Natural Rate of Unemployment 3 Deflation a Effects of Deflation Outline of Current Lecture I Open Economy Part I a Balance Payments b EX International Capital Flows c Exchange Rates Current Lecture A country s balance of payments accounts summarize its transactions with the rest of the world The balance of payments on current account or current account includes the balance of payments on goods and services together with balances on factor income and transfers The merchandise trade balance is a frequently cited component of the balance of payments on goods and services A country s balance of payments on financial account or simply its financial account is the difference between its sales of assets to foreigners and its purchases of assets from foreigners during a given period Balance Payment Graph These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute EX International Capital Flows British lenders lend to borrowers in the United States leading to equalization of interest rates at 4 in both countries At that rate American borrowing exceeds American lending the difference is made up by capital inflows from Britain Meanwhile British lending exceeds British borrowing the excess is a capital outflow to the United States Exchange Rates Currencies are traded in the foreign exchange market The prices at which currencies trade are known as exchange rates When a currency becomes more valuable in terms of other currencies it appreciates When a currency becomes less valuable in terms of other currencies it depreciates
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