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ECON 2020 Lecture Notes - Lecture 20: Import Quota, Exchange Rate, Real Interest Rate

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skycamel518
5 Apr 2017
School
CU-Boulder
Department
Economics
Course
ECON 2020
Professor
Jacob Kirsch

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Document Summary

Quantity of dollars supplied by foreign assets. Quantity of dollars supplied for net capital outflow. Does not depend on real exchange rate. Quantity of dollars demanded to buy u. s. net exports of goods and services. By foreigners, arising from us exports of goods and services. Demand: domestic investment and net capital outflow. Equilibrium, real interest rate, r is price of goods and services in the present relative to the price in the future. Price of domestic goods and services relative to foreign prices. E and r adjust simultaneously and determine. Reduces national savings, supply of loanable funds, and net capital outflow. Directly influences quantity of goods and services that a country imports/exports. Increase in demand for dollars in the market using foreign currency exchange. No change in real interest rate, net capital outflow or net exports. Does not affect u. s. trade balance: nx= nco=s-i. Large and sudden reduction in demand for assets located in that country.

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Related Questions

In the market for foreign-currency exchange in the open-economy macroeconomic model, which of the following does the amount of net capital outflow represent?
a.
the quantity of dollars supplied for the purpose of selling assets domestically
b.
the quantity of dollars supplied for the purpose of buying assets abroad
c.
the quantity of dollars demanded for the purpose of buying Canadian net exports of goods and services
d.
the quantity of dollars demanded for the purpose of importing foreign goods and services

In the market for foreign-currency exchange in the open-economy macroeconomic model, which of the following does the amount of net capital outflow represent?
a.
the quantity of dollars supplied for the purpose of selling assets domestically
b.
the quantity of dollars supplied for the purpose of buying assets abroad
c.
the quantity of dollars demanded for the purpose of buying Canadian net exports of goods and services
d.
the quantity of dollars demanded for the purpose of importing foreign goods and services

According to the foreign purchases effect,  prices in the United States and prices in other countries remain stable, without a corresponding adjustment in exchange rates

A. U.S. consumers will buy more foreign goods and services, and imports will fall foreigners will buy fewer goods and services produced in the United States, and exports will increase. The number of net exports will fall increasing the quantity of real GDP demanded, resulting in a downward sloping aggregate demand curve.

B. U.S. consumers will buy more foreign goods and services, and imports will rise, foreigners will buy fewer goods and services produced in the United States, and exports will fall. The number of net exports will fall, reducing the quantity of real GDP demanded, resulting in a downward sloping aggregate demand curve..

C. U.S. consumers will buy fewer foreign goods and services, and Imports will rise foreigners will buy more goods and services produced in the United States, and exports will fall. The number of net exports will rise, reducing the quantity of real GDP demanded, resulting in a downward sloping aggregate demand curve.

D. U.S. consumers will buy more foreign goods and services, and Imports will fall foreigners will buy fewer goods and services produced in the United States, and exports will rise. The number of net exports will rise, reducing the quantity of real GOP demanded, resulting in a downward sloping aggregate demand curve.