MANKIW: PRINCIPLES OF MACROECONOMICS
8th Edition
ISBN: 9781337801782
Author: Mankiw
Publisher: CENGAGE L
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Chapter 18, Problem 3CQQ
To determine
Changes in volume of export and import.
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Studies indicate that net exports and net capital outflows tend to be equal.
1. Explain why net exports and net capital outflows always tend to be equal.
2. Explain how a change in interest rates can lead to changes in net exports?
Discuss the role of budget surpluses and trade surpluses in national saving and investment
In an open economy, if the level of net exports rises, it must be the case thata) there is an increase in saving.b) there is an increase in investment.c) the value of saving less investment must fall.d) none of the above.
Why the correct answer is D?
Chapter 18 Solutions
MANKIW: PRINCIPLES OF MACROECONOMICS
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- A country’s investment is 8, its government spends 10 and raises 9 in taxes, and its current account is -2. Find the country’s private saving. Find the country’s public saving. How much net investment does the country receive from the rest of the world?arrow_forwardWhich of the following would be U.S. foreign direct investment? A. A U.S. canning factory opens a plant in Ecuador. B. A Bolivian bank buys U.S. corporate bonds. C. A Polish company opens a shipbuilding plant in the United States. D. A U.S. bank buys Bolivian corporate bonds.arrow_forwardUnder a closed system, when net exports equals 0, what must be true about investment spending? A Investment Consumption B Investment = Savings (C) Investment = Government Spending D) Investment Government spending - taxesarrow_forward
- Since the early 2000s, the U.S. net exports of services has _____________ and U.S. net exports of goods has _____________. a. increased, decreased b. decreased, increased c. increased, increased d. decreased, decreasedarrow_forwardWhich of the following are direct foreign investments, and which are not? Event a. A French company merges with an American company; stockholders in the U.S. company exchange their stock for shares in the French firm. b. The same Saudi businessman buys a New York apartment building. c. A Saudi businessman buys $10 million of IBM stock. Is this a direct foreign investment? d. An Italian firm builds a plant in Russia and manages the plant as a contractor to the Russian government. Yes Yes No Noarrow_forwardWould each of the following transactions be includedin U.S. net exports or in U.S. net capital outflow?Indicate whether it would represent an increase or adecrease in that variable.a. An American buys a Sony TV.b. An American buys a share of Sony stock.c. The Sony pension fund buys a bond from theU.S. Treasury.d. A worker at a Sony plant in Japan buys someGeorgia peaches from an American farmer.arrow_forward
- Which of the following statements does not belong to the main benefits of foreign direct investment (FDI)? FDI creates new jobs and boosts government tax revenues. FDI creates positive knowledge spillovers. FDI brings competition and improves efficiency. FDI makes local firms more difficult to survive and thus destroys local jobs.arrow_forward27arrow_forwardWhat is Foreign Direct Investment (FDI) all about?arrow_forward
- For an open economy, the equation Y = C + I + G + NX is an identity. If we define national saving, S, as the total income in the economy that is left after paying for consumption and government purchases, then for an open economy, it is true that a. S = I. b. S = / + NX. C./ = S + NX. d. S = 0.arrow_forwardA U.S. mutual fund buys stock issued by a corporation in Colombia. A U.S. grocery store chain builds and manages a new warehouse in Honduras. Which one(s) of these is the foreign direct investment? Which one(s) would be taken into account when computing U.S. net capital outflows?arrow_forwardIn a small open economy, if the budget deficit increases, then which of the following is likely to be accurate? a. If private saving and domestic investment stay the same, then net exports increase. b. If private saving stays the same and net exports increase, then domestic investment decreases. c. If private saving decreases and domestic investment stays the same, then net exports increase. d. If private saving increases and net exports decrease, then domestic investment decreases.arrow_forward
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