【正文】 when budget deficits were large and the ratio of the currentaccount deficit to GDP gradually widened. Macroeconomics Chapter 17 46 The Terms of Trade ? For heterogeneous goods Macroeconomics Chapter 17 47 初級產品占出口比重(%)01020304050601980 1985 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2022 2022 2022 2022 2022 2022 2022 2022 2022Macroeconomics Chapter 17 48 機械產品占出口工業(yè)品比重01020304050601980199019921994199619982000200220042006Macroeconomics Chapter 17 49 The Terms of Trade ? For heterogeneous goods ? The ratio P/Pf is called the terms of trade. ? The units for the terms of trade are ($ per home good)/( $ per foreign good) = foreign good per home good Macroeconomics Chapter 17 50 The Terms of Trade ? The terms of trade give the number of units of foreign goods that can be imported for each unit of home goods exported. ? If the terms of trade, P/Pf, rise— or improve— the home country is better off because it gets more foreign goods in exchange for each unit of home goods. ? If P/Pf falls— or worsens— the home country is worse off because it gets fewer foreign goods in exchange for each unit of home goods. Macroeconomics Chapter 17 51 The Terms of Trade ? In our equilibrium businesscycle model, economic fluctuations result from shocks to the technology level, A. ? For a single country, changes in the terms of trade have effects that are similar to changes in A. Macroeconomics Chapter 17 52 The Terms of Trade ? The Terms of Trade and the CurrentAccount Balance ? currentaccount balance in nominal terms is Bft ? Bft?1 = P Yt+ rt?1 Bft?1/P. This total is called the real gross national product (real GNP). Macroeconomics Chapter 17 10 The Balance of International Payments ? real GNP= Yt + rt?1 Yt+ rt?1Bft?1/P ? δ Kt?1 ? (Ct+Gt) ? ( It? δ K t?1) real currentaccount balance = real national saving ? domestic investment Macroeconomics Chapter 17 32 Determinants of the CurrentAccount Balance ? Results concerning the opening up of the home country to the world credit market. ? Suppose that rt rf. In this case, the opening up of the home country to the world credit market results in a currentaccount deficit. ? The home country borrows from the rest of the world to pay for higher domestic investment, It?δKt?1. Macroeconomics Chapter 17 33 Determinants of the CurrentAccount Balance ? Results concerning the opening up of the home country to the world credit market. ? If rt rf, the results are the opposite. ? The home country has a currentaccount surplus— it lends to the rest of the world and has lower domestic investment, It ?δKt?1. Macroeconomics Chapter 17 34 Determinants of the CurrentAccount Balance ? Economic Fluctuations ? A raises domestic investment, It ? δKt?1. We also have that consumption, Ct, rises, but by less than the increase in real GDP, Yt (because the increase in A is less than fully permanent). Therefore, real national saving increases. ? The overall change in the real currentaccount balance depends on whether It ? δKt?1 rises by more or less than real national saving. In general, the overall effect on the real currentaccount balance is ambiguous. Macroeconomics Chapter 17 35 Determinants of the CurrentAccount Balance ? Economic Fluctuations ? the equilibrium businesscycle model predicts that the real curren