Chapter 32

Chapter 32 is about open market economies and how it interacts interchangeably with the loanable funds and the foreign currency exchange markets. The factor in common that links both markets together is the net capital outflow. The loanable funds market has a supply of national savings and a demand of NCO and investment. On the other hand, the foreign exchange market has a supply of dollars in the market (obtained from NCO) and a demand for the dollars, which in fact determines net exports as well.