ECON 1BB3 Lecture Notes - Foreign Portfolio Investment, Interest Rate Parity, Canadian Dollar
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12 Sep 2013
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ECON 1BB3 Full Course Notes
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Net exports (trade balance): exports imports. Exports: goods/services produced domestically and sold abroad. Factors affecting the trade balance: tastes (foreign/domestic goods, prices (foreign/domestic, exchange rates, income (foreign/domestic, transportation costs, government trade policies. Net capital outflow (nco): the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreign residents. Net capital outflow is also called net foreign investment (nfi) Factors affecting the net capital outflow include: real interest rate on domestic/foreign assets, economic and political risk of holding assets abroad, government policies affecting foreign ownership of domestic assets. Foreign direct investment: a capital investment that is owned and operated by a foreign entity (day-to-day decision making) Foreign portfolio investment: an investment that is financed by a foreign entity, but operated by domestic residents. Why: when a firm sells a good to a foreigner, the firm receives a good or an asset or equal value in return, if nx changes, nco must also change.
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Related Questions
Exports of goods & services | $1000 |
Imports of goods & services | $800 |
The net change in assets owned abroad | $590 |
The net change in foreign-owned assets at home | $400 |
Unilateral transfers received | $100 |
Unilateral transfers paid | $200 |
Investment income paid to foreigners | $300 |
Investment income received from foreigners | $400 |
The balance on the capital account | $0 |
1. The balance on the current account is A) $100. B) $200. C) 0. D) - $100
2. The balance on the financial account is A) -$90. B) -$190. C) $100. D) $200
3. The statistical discrepancy is A) -$5. B) $5. C) $10. D) -$10
4. From the domestic economy's perspective,
A) there is a net international capital inflow equal to $190.
B) there is a net international capital outflow equal to $190.
C) the net international capital flow is zero.
D) its domestic absorption exceeds its GNP by $200.