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VocabularyEdit

Closed Economy

  • Definition: An economy that does not interact with other economies in the world.
  • What It Means:

Open Economy

  • Definition: An economy that interacts freely with other economies around the world.
  • What It Means:

Exports

  • Definition: Goods and services that are produced domestically and sold abroad.
  • What It Means:

Imports

  • Definition: Goods and services that are produced abroad and sold domestically.
  • What It Means:

Net Exports

  • Definition: The value of a nation's exports minus the value of its imports; also called the trade balance.
  • What It Means:

Trade Balance

  • Definition: The value of a nation's exports minus the value of its imports; also called net exports.
  • What It Means:

Trade Surplus

  • Definition: An excess of exports over imports.
  • What It Means:

Trade Deficit

  • Definition: An excess of imports over exports.
  • What It Means:

Balanced Trade

  • Definition: A situation in which exports equal imports.
  • What It Means:

Net Capital Outflow (NCO)

  • Definition: The purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners.
  • What It Means:

Nominal Exchange Rate

  • Definition: The rate at which a person can trade the currency of one country for the currency of another.
  • What It Means:

Appreciation

  • Definition: An increase in the value of a currency as measured by the amount of foreign currency it can buy.
  • What It Means:

Depreciation

  • Definition: A decrease in the value of a currency as measured by the amount of foreign currency it can buy.
  • What It Means:

Real Exchange Rate

  • Definition: The rate at which a person can trade the goods and services of one country for the goods and services of another.
  • What It Means:

Purchasing-Power Parity

  • Definition: A theory of exchange rates whereby a unit of any given currency should be able to buy the same quantity of goods in all countries.
  • What It Means:

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