Chapter 31 Journal

In Chapter 31, Mankiw discusses open market macroeconomics. We see some family equations being reused here. This chapter goes into more detail about how open economies interact with each other, through buying/selling goods. This chapter was very similar to the old chapter that dealt with net exports and imports, and I didn’t find this chapter too hard to read. The most important variables that influence net capital outflows are real interest rates on foreign and domestic assets, the perceived economic and political risk of holding assets abroad, as well as government policies that affect foreign ownership of domestic assets. We review the equation Y= C +I +G +NX.  Imports are goods and services that are produced abroad and sold domestically, and exports are goods and services that are produced domestically and sold abroad. Net exports are essentially the value of exports minus the value of its imports, called trade balance. Balanced trade is a situation where exports equal imports, and the US has been in a trade deficit since around the 1970s. There are of course prices for international transactions. Nominal exchange rate is the rate at which another person can trade the currency of one country for another. Usually, this is expressed as units of foreign currency per U. S. Dollar. Appreciation is an increase in the value of a currency as measured by the amount of foreign currency it can buy. I would rate this chapter a difficulty rating of 2/3.