Chapter 31

I would give this chapter a 1.5 out of three. This chapter introduced us to open or global economies. Previously we had kept the economies closed for simplicity's sake but now we look at a variety of factors concerning them. These include net exports and net capital outflow. Net exports is the value of the goods exported by a country minus the value of the goods imported by the country. Net capital outflow is the purchase of foreign assets by domestic residents and the purchase of domestic assets by foreign residents. Foreign assets can either be a direct or portfolio investment. Net capital outflow can be influenced by a variety of factors including the real interest rate on foreign and domestic assets, perceived risk, and government policy. Net capital outflow is always equal to net exports.