1) Use the following terms for this question: C = consumption I = capital investment spending G = government spending X = exports of goods and services M = imports of goods and services BOP = balance of payments GDP = gross domestic product NPV = net present value INF = inflation R = real rate of return The static equation for the nations GDP is:

		GDP = C + I + G + (X + M) INF
		GDP = C + I + G + X + M
		GDP = C + I + G + X - M
		GDP = C + I + X - M + R

2)

Long-term capital flows reflect the following factors EXCEPT:

		short term interest rate differentials
		fundamental economic expectations
		growth prospects
		perceptions of political stability