International trade 1

In Schengen Area there are

• only EU countries

• all EU countries

• some EU countries

• some countries form outside EU

The customs union (EU) means that

• member states cannot levying any duties on goods crossing internal borders

• countries can impose duties on goos crossing the internal borders, if they are produced outside EU

• there is a common external tariff on all goods entering the area

Export and import of goods and services as a share of GDP

• export and import ratios to GDP is the largest in Luxemburg

• in Poland the export share is much smaller than the import share

• the export share in GDP is larger in Germany than in France

• Trade-GDP ratio is larger in Italy than in UK

Net export (NX)

• is the level of export minus duties

• is the difference between export and import

• is import minus export

• $NX=Ex-Im$

The national income identity assumes that

• $Y=C+G+I+NX$

• Total output is the sum of domestic spending and the export.

• Net export is the difference between the total output and the domestic spending

• NX= Y-C-G

Trade deficit means that

• export is smaller than import

• $NX<0$

• $NX>0$

• export is larger than import

Net capital outflow measures

• $I-S$

• trade balance

• net outflow of “loanable funds”

• $S-I$

In a model of a small open economy it is assumed that

• there are some restiriction on capital mobility

• there are no restrictions on international trade in

  assets

• the economy is small and cannot affect the world interest rate

• the domestic interest rate equals the internationl one

In a small open economy, the level of investment,  $I\left(r\right)$  

• depends on the level of domestic savings

• depends on the international interest rata

• is downward sloping

• determines the level of next export

Suppose, in a small closed economy, the governement decreases the taxes (T) and does not change the goverment expenditure. Then

• the budgent deficit increases

• the level of national savings decreases

• the net export decreaes

• the level of investment falls