Open Economy Macroeconomics (Part 2) — Important Questions

Output Market, Financial Market, Labour Market

An open economy establishes linkages through three main channels: Output Market (trade in goods and services), Financial Market (buying financial assets), and Labour Market (movement of workers). Real estate market is not a primary international linkage.

True

Balance of Payments (BoP) is a systematic record of all economic transactions between residents of a country and the rest of the world for a specified time period, typically a year.

Banking services, Tourism, Software services, Remittances

Invisibles include services, transfers, and income flows. Banking, tourism, software services, and remittances are all invisible items. Export of rice is a visible good, not an invisible.

International transactions of assets

Capital Account records all international transactions of assets like foreign direct investment (FDI), foreign institutional investment (FII), external borrowings, and purchase/sale of assets abroad.