Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 25, Problem 5PA
Subpart (a):
To determine
Foreign investment and its effects.
Subpart (b):
To determine
Foreign investment and its effects.
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Chapter 25 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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- Which of the following are direct foreign investments? Explain your answer. i. A Chinese company pays $6.49 million for a stake in the Hilton. ii. A Russian businessman buys $44 billion on FOREX. iii. An American company buys another American company; stockholders in the bought-US company sell their shares on FOREX. iv. A Turkish company builds a factory in Ethiopia and manages the factory as a contractor to the Turkish government.arrow_forwardLet’s assume that some foreign countries start to subsidize investment by instituting an investmenttax credit.a) What happens to world investment demand as a function of the world interest rate?b) What happens to the world interest rate?c) What happens to investment in our small open economy?d) What happens to our trade balance?e) What happens to our real exchange rate?arrow_forwardWhat effect will a change in the price of oil have on the foreign exchange market of a developing country like South Africa where oil is imported? Include a diagram in your answerarrow_forward
- Why do businesses pursue international expansion beyond their domestic markets?arrow_forwardINTERNATIONAL TRADE Which of the following are direct foreign investments? Explain your answer. i. A Chinese company pays $6.49 million for a stake in the Hilton. ii. A Russian businessman buys $44 billion on FOREX.arrow_forwardTrue or False. And why? Suppose the US is a more capital-abundant economy than China. We would expect the trade war to be harmful to capital owners.arrow_forward
- Which is an example of foreign portfolio investment? a. Australian tourists going on a safari in Kenya. b. Indonesian merchants selling coffee beans to Japanese importers. c. US consumers increasing their demand for German automobiles. d. Brazilian banks using pesos to buy stock in Mexican corporations.arrow_forwardA. Countries that export a diversified selection of export products do not seem to be at much risk of experiencing immiserizing growth. Group starts. 1. True or 2.False B. Immiserizing growth is the situation in which the expansion of a country's exporting industry results in an increase in the world price of the exported good and a decrease in the economic well-being of the country. 1. True or 2.False C. According to the Rybczynski theorem, in a two-good world, with constant product prices, growth in a country's endowment of any one input results in an increase in the production of the good which does not use this input intensively. 1. True or 2.False D.Any change in the volume of export or import by a small country will have no effect on its terms of trade. 1. True or 2.Falsearrow_forwardFrom time to time, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Is this possible?arrow_forward
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