Chapter 13 ( Open Economy )

All the Home Work Questions Chapter 13

The value of the goods and services Australia purchases from the U.S. are less than the value of goods and services the U.S. purchases from Australia. The U.S. has

 

negative net exports with Australia and a trade deficit with Australia.

If France had positive net exports last year, then it

sold more abroad than it purchased abroad and had a trade surplus.

If the U.S. has exports of $1.5 trillion and imports of $2.2 trillion, then the U.S.

buys more from overseas then it sells overseas; it has a trade deficit.

Net capital outflow equals

the value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners.

Net capital outflow equals the difference between a country's

 

purchases of foreign assets and sales of domestic assets abroad.

The purchase of U.S. government bonds by Egyptians is an example of

foreign portfolio investment by Egyptians.

John, a U.S. citizen, opens up a Sports bar in Tokyo. This is an example of U.S.

foreign direct investment.

Sam, a U.S. citizen, buys bonds issued by a Greek company that bottles olives. Sam’s purchase is

foreign portfolio investment. By itself it increases U.S. net capital outflow.

Suppose that U.S. citizens purchase more cars made in Korea, and Koreans purchase more bonds issued by U.S. corporations. Other things the same, these actions

lower both U.S. net exports and U.S. net capital outflows.

Which of the following equations is correct?

S = I + NCO

Which of the following equations is always correct in an open economy?

All of the above are correct.

If a country has a trade surplus then

S > I and Y > C + I + G.

If a country has Y > C + I + G, then

S > I and it has a trade surplus.

If a country has a trade deficit

it has negative net exports and negative net capital outflow.

If a country exports more than it imports, then it has

positive net exports and positive net capital outflows.

If U.S. residents purchase $750 billion worth of foreign assets and foreigners purchase 400 billion worth of U.S. assets,

U.S. net capital outflow is $350 billion; capital is flowing out of the U.S.

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets, then France’s net capital outflow is

-.3 trillion euros, so it must have a trade deficit.

Last year a country had exports of $100 billion, imports of $70 billion, and purchased $60 billion worth of foreign assets. What was the value of domestic assets purchased by foreigners?

$30 billion

Other things the same, if the exchange rate changes from .8 euros per dollar to .9 euros per dollar, the dollar

appreciates so U.S. goods become more expensive relative to foreign goods.

Foreign-produced goods and services that are purchased domestically are called

imports.

One year a country has positive net exports. The next year it still has positive but larger net exports

its trade surplus rose.