Bundle: Principles of Economics, Loose-leaf Version, 8th + LMS Integrated MindTap Economics, 2 terms (12 months) Printed Access Card
8th Edition
ISBN: 9781337607735
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 31, Problem 1QR
To determine
Define net export and net capital outflow.
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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?
would each of the following transactions
be included in net exports or net capital
outflow? Please also tell whether it would
represent an increase or a decrease
in that variable.
i. A Pakistani buys a Sony TV.
ii. A Pakistani buys a share of Sony stock.
iii. The Sony pension fund buys a bond
from Pakistani Treasury.
iv. A worker at a Sony plant in Japan buys
some mango from a Pakistani
farmer.
a) Would each of the following transactions be included in net exports or net capital outflow? Be sure to say whether it would represent an increase or decrease in that variable.
i) An Indian buys a Samsung TV
ii) An Indian buys a share of sony stock
iii) The sony pension fund buys a bond from the Indian government
iv) A worker at a Toyota plant in Japan buys some Nagpur oranges from an Indian farmer
Chapter 31 Solutions
Bundle: Principles of Economics, Loose-leaf Version, 8th + LMS Integrated MindTap Economics, 2 terms (12 months) Printed Access Card
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Similar questions
- Why are net exports and net capital outflow always equal? Derive the relation between savings,domestic investment, and net capital outflow using the national income accounting identity.arrow_forwardWould each of the following transactions be included in U.S. net exports or in U.S. Net capital outflow? An American buys a Sony TV.b.An American buys a share of Sony stock.c.The Sony pension fund buys a bond from the U.S. Treasuryd.A worker at a Sony plant in Japan buys some Georgia peaches form an American farmer.arrow_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
- Under 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_forwardhow is the balance of payments linked to national saving and investment? explain.arrow_forwardWhat are the benefits and costs associated with foreign portfolio investment (FPI)?arrow_forward
- I am a bit confused on how to identify whether the problems are decreasing/increasing in Net Exports and Net Capital Flowarrow_forward4. Net capital outflow and net exports An open economy interacts with the rest of the world through its involvement in world markets for goods and services and world financial markets. Although it can often result in an imbalance in these markets, the following identity must remain true: Net Capital Outflow= Net Exports In other words, if a transaction directly affects the left side of this equation, then it must also affect the right side. The following problem will help you understand why this identity must hold. Suppose you are a software engineer living in the United States, and you just sold your latest product to a Russian consumer for RUB 7,000. Determine the effects of this transaction on exports, imports, and net exports in the U.S. economy, and enter your results in the following table. If the direction of change is "No change," enter "0" in the Magnitude of Change column. Hint: The magnitude of change should always be positive, regardless of the direction of change.…arrow_forwardIf a Canadian corporation sells a product to the United States and uses the proceeds to purchase a product manufactured in United States, then Canadian net exports _____, and net capital outflows _____.arrow_forward
- For Turkey, would each of the following transactions affect net exports or net capital outflow or both? In addition, would the same transactions represent an increase or a decrease in that variable? For each transaction, choose the correct answer from the drop down menu: Al Kharafi family from Kuwait buys a house in Trabzon. Choose. Türk Telekom buys network equipment from Ericsson, a Choose. firm in Sweden. Increase Net Exports, Decrease Net Capital Outflow Katya and Igor Oblomov from Moscow spend their Decrease Net Exports, Decrease Net Capital Outflow vacation in Antalya. Decrease Net Exports, Increase Net Capital Outflow Ford Otosan sells Transit vans to Germany. Increase Net Capital Outflow Arçelik buys Hitachi's Asian business for $300 million. Decrease Net Capital Outflow Increase Net Exports, Increase Net Capital Outflowarrow_forwardSuppose there is an increase in foreign output. Show the effect on the domestic economy . What is the effect on domestic output? On domestic net exports?arrow_forwardHow do fluctuating exchange rates benefit MNCs and how do they affect them negatively? Give an example of both.arrow_forward
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