Grades 9-12
AP Macroeconomics – Net Exports and Capital Flows
This lesson supports the Open Economy: International Trade and Finance section of the Advanced Placement Macroeconomics course. This lesson introduces net capital flows and examines their effect on the macroeconomy through the loanable funds market.
This lesson appears as Lesson 5, Unit 7: Open Economy: International Trade and Finance in CEE’s Advanced Placement Macroeconomics (4th Edition).
Introduction
In this lesson from Advanced Placement Economics (4th Edition), students examine the effect of net capital flows on the macroeconomy through the loanable funds market.The loanable funds market is used to analyze capital flows in an economy because financial capital affects the amount of money available for borrowers and shifts the supply curve for loanable funds. Students also graph and explain how changes in the current account and balance of trade affect the foreign exchange market.
Bell Ringer: Tell students to pretend they are visiting a foreign country and have arrived with only U.S. dollars. Ask them if they would want the dollar to appreciate or depreciate? Why?
Learning Objectives
- Define capital inflow and outflow.
-
Graph and explain how changes in the current account and balance of trade affect the foreign exchange market.
-
Use a graph of the loanable funds market to analyze the effect of capital flows on the realinterest rate.
Resource List
- Net Exports and Capital Flows, Teacher Lesson
- Net Exports and Capital Flows, Student Resource Manual
- Net Exports and Capital Flows, Solutions
Process
Please refer to the Net Exports and Capital Flows, Teacher Lesson.
Conclusion
Not available for this lesson.
Extension Activity
Not available for this lesson.
Assessment
Please refer to the Net Exports and Capital Flows, Student Resoure Manual.
Related Resources
Grades 9-12
AP Macroeconomics - The Money Market and the Loanable Funds Market
Grades 9-12
The Trans-Pacific Partnership (TPP): Are the Presidential Candidates Telling the Whole Story?
Grades 9-12