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- Does a higher rate of return in a nations economy, all other things being equal, affect the exchange rate of its currency? If so, how?Suppose that Americans decide to increase theirsaving.a. If the elasticity of U.S. net capital outflow withrespect to the real interest rate is very high, willthis increase in private saving have a large orsmall effect on U.S. domestic investment?b. If the elasticity of U.S. exports with respect to thereal exchange rate is very low, will this increase inprivate saving have a large or small effect on theU.S. real exchange rate?Other things the same, the purchase of a U.S. government bond by a resident of Singapore decreases U.S. net capital outflow and increases Singapore’s net capital outflow. Ture or False?
- provides some hypothetical data on macroeconomicaccountsforthreecountriesrepresented by A, B, and C and measured in billions of currency units. In Table, private household saving is SH, tax revenue is T, government spending is G, and investment spending is I. a. Calculate the trade balance and the net inflow of foreign saving for each country. b. State whether each one has a trade surplus or deficit (or balanced trade). c. State whether each is a net lender or borrower internationally and explain.In the open-economy macroeconomic model, the key determinant of net capital outflow is the A. real interest rate. When the real interest rate rises, net capital outflow rises. B. real interest rate. When the real interest rate rises, net capital outflow falls. C. real exchange rate. When the real exchange rate rises, net capital outflow rises. D. real exchange rate. When the real exchange rate rises, net capital outflow falls.1. What explains how the dollars per euro exchange rate will change in the future if the exchange rate is wxpected to rise. 2. What is addressed by the USMCA? 3. Country A has a GDP of 60,000,000 and country B has a per capita of 2,000. If the populations of countries a and b are 40,000 and 20,000 respectively, which country is most developed based on per capita GDP? 4. how can a difference in Gini coefficients for the United States and china be interpreted 5. which of the following trends have followed globalization?
- Explain how the following transactions would affectU.S. net capital outflow. For each transaction, statewhether it represents direct investment or portfolioinvestment.a. An American cellular phone company establishesan office in the Czech Republic.b. Harrods of London sells stock to the GeneralMotors pension fund.c. Honda expands its factory in Marysville, Ohio.d. A Fidelity mutual fund sells its Volkswagen stockto a French investor.Other things the same, an increase in the U.S. interest rate causes U.S. net capital outflow to A. rise, so demand in the market for foreign-currency exchange shifts right... B. fall, so demand in the market for foreign-currency exchange shifts left. C. fall, so supply in the market for foreign-currency exchange shifts left. D. rise, so supply in the market for foreign-currency exchange shifts right..In the open-economy macroeconomic model, if investment demand increases, then the real interest rate will _____________________ and the real exchange rate will _________________. Group of answer choices increase, increase decrease, increase increase, decrease decrease, decrease
- The Small Open Economy macroeconomic model assumes that GDP is constant. However, the model could be used to analyze the effects of a one-time increase in GDP as a rightward shift of the supply of loanable funds. What would the model predict about the real interest rate, net capital outflow, net exports, and the real exchange rate when GDP increases? B v E E Pa... v ...Why has it been politically challenging for governments to refocus efforts on new technology, education, and physical capital investment since the 2008-2009 recession? Select the correct answer below. They have focused on short-term recovery, but not enough on the long-term. O They have focused on long-term recovery, but not enough on the short-term. Efforts have instead been directed towards keeping the exchange rate constant. High-income countries do not prioritize the development of new technology, education, or physical capital investments.A case study in the chapter analyzed purchasingpower parity for several countries using the pricc ofBig Macs. Here arc data for a few more countries: a. For each country, compute the predicted exchangerate of the local currency per U.S. dollar. (Recallthat the U.S. price o( a Big Mac was $4.93.)b. According to purchasing-power parity, what is thepredicted exchange rate between the Hungarianforint and the Canadian dollar? What is the actualexchange rate?c. How well docs the theory of purchasing-powerparity explain exchange rates?