Given: NX = NCO.

How can it be argued in the standard model of an open economy (e.g. https://slideplayer.com/slide/12862696/) that NCOs stay unchanged when a quota is placed on imports?

It seems that in one place in the textbooks we state NX=NCO is a "biblical truth" but then when we apply the open economy model we say that NX increase has no effect on NCO.

If there is a restriction on imports this must increase NX. Which must move NCO to the right or cause a shift along the curve (I wouldn't know which).

This would also seem logical, a protectionist economy is not one that foreign investors would want to invest in. Therefore they would remove their investment (NCO increases).


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