KEY EQUATIONS

CA + FA = 0 (5.1)

Except for problems of measurement, the current account balance, CA, and the financial account balance, FA, always sum to zero. The reason is that every international trans­action involves a swap of goods, services, or assets; the two sides of the swap always have offsetting effects on CA + FA.

S^d = I^d + NX (5.4)

The goods market equilibrium condition in an open econ­omy is that desired national saving, S^d, must equal desired

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