economics 6

Which of the following is an example of U.S. foreign portfolio investment?

A U.S. citizen buys bonds issued by the British government.

When Claudia, a U.S. citizen, purchases a handbag made in France, the purchase is

a U.S. import and a French export.

Paine Pharmaceuticals produces medicines in the U.S. Its overseas sales

are an export of the U.S. and increase U.S. net exports.

Sonya, a citizen of Denmark, produces boots and shoes that she sells to department stores in the United States. Other things the same, these sales

decrease U.S. net exports and increase Danish net exports.

A Swiss company sells chocolates to a retailer in the United States. These sales by themselves

decrease U.S. net exports and increase Swiss net exports.

Suppose that Egypt has a government budget surplus, and then goes into deficit. This change would

decrease national saving and shift Egypt's supply of loanable funds left.

Other things the same, if the exchange rate changes from 125 yen per dollar to 115 yen per dollar, the dollar has

depreciated and so buys fewer Japanese goods.

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as

e(P/P*).

Purchasing-power parity describes the forces that determine

exchange rates in the long run.

One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports.

its trade deficit rose

Which type(s) of economies interact with other economies?

only open economies

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations. Other things the same, these actions

raise both U.S. net exports and U.S. net capital outflows.

If Saudi Arabia had positive net exports last year, then it

sold more abroad than it purchased abroad and had a trade surplus.

Other things the same, if the dollar depreciates relative to the British pound, then

the exchange rate falls. It will cost fewer pounds to travel in the U.S.

Suppose that more British decide to vacation in the U.S. and that the British purchase more U.S. Treasury bonds. Ignoring how payments are made for these purchases,

the first action by itself raises U.S. net exports, the second action by itself lowers U.S. net capital outflow.

If purchasing power parity holds, the price level in the U.S. is 120, and the price level in Canada is 140, which of the following is true for the US dollar?

the nominal exchange rate is 140/120

Stacey, a U.S. citizen, buys a bond issued by an Italian pasta manufacturer. Stacey, a U.S. citizen, buys a bond issued by an Italian pasta manufacturer.

This purchase is foreign portfolio investment. By itself it increases U.S. net capital outflow.

Clear Brook Farms, a U.S. manufacturer of frozen vegetarian entrees, sells cases of its product to stores overseas. Its sales

increase both U.S. exports and U.S. net exports.

When Microsoft establishes a distribution center in France, U.S. net capital outflow

increases because Microsoft makes a direct investment in capital in France.

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.

If the exchange rate is 50 Bangladesh taka per dollar and a bushel of rice costs 180 taka in Bangladesh and $3 in the United States, then the real exchange rate of the US dollar is

less than one and arbitrageurs could profit by buying rice in the United States and selling it in Bangladesh.

If a country has negative net capital outflows, then its net exports are

negative and its saving is smaller than its domestic investment.

If a country institutes policies that lead domestic firms to desire more capital stock

net capital outflows fall and the real exchange rate rises.

A Japanese firm buys lumber from the United States and pays for it with yen. Other things the same, Japanese

net exports decrease, and U.S. net capital outflow increases.

If a dollar currently purchases 10 pesos and someone forecasts that in a year it will be 11 pesos, then the forecast is given in

nominal terms and implies the dollar will appreciate.