Chapter 31 ans 32 econ
shifter of forex: income - japanese income increases
$ appreciates yen depreciates
shifter of forex: interests rates - rates go up in japan
$ depreciates yen appreciates
shifter of forex: price level - inflation in the us
$ depreciates yen appreciates
shifter of forex: tastes - Americans vacation in japan
$ depreciates yen appreciates
If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets, then France's net capital outflow is
-.3 trillion euros, so it must have a trade deficit.
Which of the following is an example of U.S. foreign direct investment?
A U.S. citizen builds and operates a coffee shop in the Netherlands.
In the open-economy macroeconomic model, the supply of loanable funds comes from
None of the above is correct.
U.S. corporation Well's Petroleum borrows money to build an oil well in Texas and to build another in Venezuela. Borrowing for which well is included in the demand for loanable funds in the U.S.?
The U.S. and Venezuela.
Which of the following is correct?
U.S. exports as a percentage of GDP have more than doubled since 1950. The U.S. currently has a trade deficit.
Capital account shows
assets.
If a country has business opportunities that are relatively attractive to other countries, we would expect it to have
both negative net exports and negative net capital outflow.
appreciation means
decrease in net exports
If U.S. consumers decrease their demand for cellphones from Finland, then other things the same Finland's
exports and net exports fall.
Current account shows
goods and services.
depreciation means
increase in net exports
If the exchange rate falls, U.S. residents pay
more dollars for foreign bonds and get more dollars from interest payments.
Suppose that real interest rates in the U.S. rise relative to real interest rates in other countries. This increase would make foreigners
more willing to purchase U.S. bonds, so U.S. net capital outflow would fall.
At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals
national saving.
In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from
net capital outflow
If net exports are negative, then
net capital outflow is negative, so American assets bought by foreigners are greater than foreign assets bought by Americans.
Other things the same, if a country saves more, then
net capital outflow rises, so net exports rise.
If a country has Y > C + I + G, then it has
positive net capital outflow and positive net exports.
The real exchange rate measures the
price of domestic goods relative to the price of foreign goods.
Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to
rise because national saving rises.
Mark, a U.S. citizen, buys stock in a British Shipping company. This purchase is an example of
saving for Mark and U.S. foreign portfolio investment.
Other things the same, if the dollar depreciates relative to the Japanese yen, then
the exchange rate falls. It will cost fewer yen 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.
Other things the same, which of the following could explain a rise in Sweden's net capital outflow?
the probability of default on Swedish bonds rises
In the open-economy macroeconomic model, the market for loanable funds equates national saving with
the sum of domestic investment and net capital outflow.
A U.S. company wants to buy yen in order to buy Japanese bonds. In the open-economy macroeconomic model, this transaction would be part of
the supply of currency in the foreign exchange market, and part of the demand for loanable funds.
The open-economy macroeconomic model examines the determination of
the trade balance and the exchange rate.
If savings is greater than domestic investment, then
there is a trade surplus and Y > C + I + G.
Suppose that the real return from operating factories in Ghana rises relative to the real rate of return in the United States. Other things the same,
this will increases U.S. net capital outflow and decrease Ghanan net capital outflow.
In the open-economy macroeconomic model, the purchase of a capital asset by domestic residents adds to the demand for loanable funds
whether the asset is located at home or abroad.
Anytime you have a current account deficit,
you have a capital account surplus.
