open economy

value of a nations exports minus the value of its imports

the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners

an excess of exports over imports

an excess of imports over exports

the rate at which a person can exchange the currency of one country for the currency of another

the rate at which a person can trade goods and services of one country for the goods and services of another

• appreciation-increase in the value of a currencyas measured by the amount of foreign currency it can buy
• depreciation-decrease in the value of a currencyas measured by the amount of foreign currency it can buy

the theory of exchange rates whereby a unit of any given currency should be able to buy the same quantity of goods in all countries

taking advantage of price differences for same items in different markets

• nominal exchange rate*domestic price
• foreign exchange rate