LGS 200 Lecture Notes - Lecture 18: Foreign Portfolio Investment, Capital Outflow, Loanable Funds

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yellowcattle867

9 May 2017

School

University of Alabama

Department

Legal Studies

Course

LGS 200

Professor

Tripp

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Document Summary

Introduction: one of the ten principles of economics from chapter 1: trade can make everyone better off, this chapter introduces basic concepts of international macroeconomics. Closed versus open economies: a closed economy does not interact with other economies in the world, an open economy interacts freely with other economies around the world. 1950s, imports and exports: 4-5% of gdp. Recent years: exports increased more than twice, imports increased more than three times. Foreign purchases of domestic assets exceed exceed foreign purchases of domestic assets domestic purchases of foreign assets. Variables that influence nco: real interest rates paid on foreign assets, real interest rates paid on domestic assets, perceived risks of holding foreign assets, government policies affecting foreign ownership of domestic assets. The equality of nx and nco: an accounting identity: nco = nx. Arises because every transaction that affects nx also affects nco by the same amount (and vice versa: when the foreigner purchases a good from the us. ,

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

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magentaraven576

Since the United States has negative net foreignâ investment, its

A. net capital flow must be negative.

B. domestic saving must be less than its domestic investment.

C. exports must be greater than its imports.

D. domestic investment must be less than its domestic saving.

Expansionary fiscal policy is less effective in an open economy because

A. increases in the money supply will reduce interest rates and lower the value of theâ dollar, reducing aggregate demand.

B. increases in government spending can increase interestâ rates, which increases the value of the dollar and crowds out net exports.

C. increases in government spending will be partly spent on importedâ goods, which do not benefit the domestic economy.

D. increases in taxes reduceâ consumption, which in turn reduces consumption of imports and increases net exports.

When the Federal reserve uses contractionary monetary policy to reduceâ inflation, it

A. sells treasury securities increasing interestâ rates, leading to a stronger dollar that lowers net exports in an open economy.

B. buys treasury securities decreasing interestâ rates, leading to a weaker dollar that lowers consumption of durables in a closed economy.

C. sells treasury securities decreasing interestâ rates, leading to a stronger dollar that lowers domestic investment in a closed economy.

D. buys treasury securities increasing interestâ rates, leading to a weaker dollar that increases net exports in an open economy.

If a country saves more than it investsâ domestically, then its net foreign investment must be (positive, negative, or zero)?

LGS 200 Lecture Notes - Lecture 18: Foreign Portfolio Investment, Capital Outflow, Loanable Funds

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