8. The impact of international capital flows Suppose that the following graph depicts the market for funds in the US credit market. The blue line, labeled D, represents the demand for funds. The supply curve labeled s₁ represents the supply curve of funds from American sources, with no foreign funds in the market. The supply curve labeled 82 represents the supply curve of funds from both American and foreign sources. Long-Term Interest Rate 2 1 0 о 10 9 8 D Slope: -1 Amount of Funds ? Without influence from foreign sources of funds, the long-term equilibrium interest rate is term equilibrium interest rate is %. With influence from foreign funds, the long- %. The following graph depicts the market for business investments in the United States. The green line represents the relationship between the long- term interest rate and the amount of business investments.

A. An exporter in the U.S is planning to ship $10,000,000 worth of automobiles to Germany in 6 months. What kind of foreign currency event should the exporter hedge against? What could happen if the exporter did not hedge? B. The selling price of 3-month forward U.K. pound sterling is $1.7107 and, the spot rate for pounds the selling price is $1.8953. Calculate the per annum percentage premium or discount in the forward rate.

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1.  The government of country X is committed to fighting corruption and providing tax holidays for the investor to improve the business climate and reduce asset risk. These policies will …. increase both country's net exports and net capital outflows increase country's net exports but decrease country's net capital outflows decrease both net exports and net capital outflows decrease country's net exports but increase country's net capital outflows 2.  Suppose that the Indonesia government went from a budget deficit to a budget surplus, then …. the interest rate and the real exchange rate would increase, while net capital outflow would decrease the interest rate and the real exchange rate would decrease, while net capital outflow would increase the interest rate would increase, while both the real exchange rate and net capital outflow would decrease the interest rate would decrease, while both the real exchange rate and net capital outflow would increase 3. When the real exchange…

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Economics   Where would you invest your $10,000 to maximize your yield with no foreign exchange risk?in the United StatesO in the United KingdomO cannot tellO does not make any differenceO in Germany

BASED ON THE STATEMENT STATE TRUE OR FALSE 1. An offshore center is a country which offers to the residents and non-residents of other countries the ability to establish companies and to use its financial services for activities outside this center, offering in most of the cases some advantages such as low taxation rates.  2. Primary offshore centers act only as intermediation of funds transfer.  3. Clients arranged for money held in an offshore account to be ‘lent’ as loans to their onshore entities is suspicious activity under the ‘know-your-customer’ policy. 4. One of the main function of investment bank is to accept deposit and provide credit line to customer.

MCAfee Sea 28L 29 30L|31C 31G|320 336340350 360 6. 10 11 12 13 14 37 380 39 40 41 15 16 17 18 19 20 21 QUESTION 23 In the foreign exchange market, if the U.S. interest rate rises relative to interest rates in other nations, then the demand and the supply curve of U.S. dollars curve for U.S. dollars O shifts to the right; shifts to the left O shifts to the left, shifts to the left O shifts to the right; shifts to the right does not shift, does not shifts O shifts to the left, shifts to the right QUESTION 24 Autonomous expenditure includes O. consumption expenditure, investment, and imports. O consumption expenditure, investment, and net taxes investment, government expenditure on goods and services, and exports onditures, Investment, and exports. Oinvestment, government expenditure for goods and services, and imports.

In August 2015 investor sentiment shifted against the Chinese yuan. Investors sold the yuan and bought dollars, as financial capital flowed out of China, seeking better rates of return in other countries. What actions did China take in response to this situation? O China used $1 trillion of its foreign exchange reserves to purchase the yuan in an attempt to prevent further devaluation and tightened capital controls on financial outflows. O China loosened capital controls to encourage forcign investment into the Chinese economy. O China sold the yuan to encourage further depreciation in an attempt to improve its trade deficit. China's monetary authority sold tie yuan in an attempt to orevent fürther devaluation and raised interest rates to stem the outflow of forcige capital.

Where would you invest your $10,000 to maximize your yield with no foreign exchange risk?in the United StatesO in the United KingdomO cannot tellO does not make any differenceO in Germany