1. Determine whether each of the following is an example of an import, export, financial inflow, or financial outflow. If it is a financial flow, is it an example of foreign direct investment or portfolio investment?

a. Tesla began building a factor dedicated to large-scale production of batteries in Shanghai.

b. A german business pays an American consultant for financial advice.

c. An American family spends $2,000 on hotels and meals while taking a vacation in London.

d. U.S. oil refineries purchased US$53 billion of crude petroleum from Canadian oil companies.

e. You sell a hand-knitted scarf on Etsy to a woman who lives in France.

f. A saver in Mexico purchases $100 in U.S. government bonds.

2. You just spent two weeks in Guatemala on vacation. Your trip is over, and you realize that you overestimated how much local cash you would need while in Guatemala. Now you want to convert your remaining 1,500 Guatemalan quetzal (GTQ) back to U.S. dollars. The exchange rate is US$1 for 7.5 GTQ. How many U.S. dollars will you receive?

3. If the U.S. Federal Reserve unexpectedly cuts the interest rate, what effect do you expect this will have on the U.S. dollar?

4. You are a purchasing manager for General Electric and need to decide whether you should buy stainless steel from a supplier in China or source it from a foundry in Pittsburgh. If you buy it from the Pittsburgh foundry, you'll pay $3,000 per metric ton. If you buy from China, you'll pay 14,000 yuan per metric ton. Both prices include transportation costs. The nominal exchange rate is US$1 for 7 yuan.

a. Calculate the real exchange rate-the price of domestic steel in dollars, relative to the price of imported steel converted into dollars-and use this to decide whether you should buy the domestic or imported steel.

b. A rise in the cost of Chinese labor leads to a rise in the price of Chinese steel to 28,000 yuan per metric ton. The nominal exchange rate is still US$1 for 7 yuan. What has happened to the real exchange rate? Does this make it more or less likely that General Electric purchases steel from the foundry in Pittsburgh?

5. In 2018, Germany had the world's largest current account surplus of US$291 billion. Using this one piece of information, answer the following questions.

a. Which was greater, the income Germans earned from abroad or incomes paid abroad from Germany?

b. What is Germany's financial account balance? Is it a surplus or deficit?

c. Were financial inflows or financial outflows greater for Germany?

d. Was total spending or total income greater in Germany in 2018?