Chapter objectives Accounting identities(会计恒等式)for the open economy ■ Small open economy model ·what makes it“small'” how the trade balance and exchange rate are determined how policies affect trade balance exchange rate CHAPTER 8 The Open Economy slide 1CHAPTER 8 The Open Economy slide 1 Chapter objectives ▪ Accounting identities(会计恒等式) for the open economy ▪ Small open economy model ▪ what makes it “small” ▪ how the trade balance and exchange rate are determined ▪ how policies affect trade balance & exchange rate