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Open-Economy National Income Accounting ...

Warnock, Francis E...

Technical Note

Open-Economy National Income Accounting and the IS/LM Model

Warnock, Francis E.; Murphy, Daniel

GEM-0128 | Published December 17, 2015 | 14 pages Technical Note

Collection: Darden School of Business

Product Details

When we introduce macroeconomic models, we assume that goods and services are exchanged within a single country but not across countries. This assumption is useful for understanding some of the primary determinants of output, inflation, and interest rates. In reality, however, economies trade with each other, and the presence of international markets has implications for national economies. In this note, we incorporate international markets to understand how changes in one country can affect other countries.