Chapter 15 Net Exports and International Finance. 1. THE ROLE AND NATURE OF INVESTMENT. Learning Objectives Discuss the main arguments economists make in support of free trade. Explain the determinants of net exports and tell how each affects aggregate demand.
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Chapter 15 Net Exports and International Finance
Effect of initial decrease in net exports without multiplier
Multiplier times the initial decrease in net exports
Effect of initial increase in net exports without multiplier
Multiplier times the initial increase in net exports
Weakness in the Japan economy causes the baht demand to fall
Thai asset holders sell baht fearing the central bank might give up its efforts
Thailand’s central bank buys baht, increasing demand
In July 1997 the central bank gave up efforts to prop the currency. By the end of the year the value of the baht had fallen to about $0.02