For henry
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List the factors that might influence a country’s exports, imports, and trade balance.
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Suppose that Bill, a resident of the U.S., buys software from a company in Japan. Explain why and in what direction this changes U.S. net exports and U.S. net capital outflow.
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What is the logic behind the theory of purchasing-power parity?
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Suppose that money supply growth continues to be higher in Turkey than it is in the United States. What does purchasing-power parity imply will happen to the real and to the nominal exchange rate?
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State what, if anything, each of the following does to the supply or demand of loanable funds.
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Net capital outflow increases at each interest rate
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Domestic investment increases at each interest rate
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The government deficit increases.
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Private saving increases.
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Suppose that U.S. investors decide that investment opportunities in African countries have improved. What happens to U.S. net capital outflow? What happens to the U.S. real interest rate?
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Suppose that U.S. citizens start saving more. What does this imply about the supply of loanable funds and the equilibrium real interest rate? What happens to the real exchange rate?
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Suppose the U.S. government institutes a “Buy American” campaign, in order to encourage spending on domestic goods. What effect will this have on the U.S. trade balance?
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