Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

4. Net capital outflow and net exports An open economy interacts with the rest of the world through involvement in world nancial markets, and also

image text in transcribedimage text in transcribed
image text in transcribedimage text in transcribed
4. Net capital outflow and net exports An open economy interacts with the rest of the world through involvement in world nancial markets, and also world markets for goods and services. Despite the fact that this involvement often results in an imbalance in these markets, the following identity must hold: Net Capital Outflow : Net Exports That is, any transaction that affects the left side of this equation must also affect the right side. The following problem provides a scenario that illustrates why this identity must remain true. Suppose you own a big box retailer in the United States, where there will soon be high demand for the brand new PlayNation 4 video game console. Anticipating this trend, you spend $15,000 to build out your inventory of the console, which is manufactured by Zboz, a Japanese company, in Japan. Determine the effects of this transaction on exports, imports, and net exports in the U.S. economy, and enter your results in the following table. If the direction of change is "No change, " enter "0" in the Magnitude of Change column. Hint: The magnitude of change should always be positive, regardless of the direction of change. Magnitude of Change Direction of Change (Dollars) _.. E um _v E Because of the identity equation that relates to net exports, the 'V in U.S. net exports is matched by V in U.S. net capital outow. Which of the following is an example of how the United States might be affected in this scenario? Check all that apply. [:l Zboz exchanges the $15,000 for yen at the local bank, which then uses the dollars to purchase U.S. bonds. [3 Zboz purchases $15,000 worth of U.S. bonds. [3 Zboz purchases $15,000 worth of stock in a U.S. company

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

International Marketing

Authors: Philip R Cateora

14th Edition

0073380989, 9780073380988

More Books

Students also viewed these Economics questions

Question

7.6 Describe what is known about the biology of memory

Answered: 1 week ago

Question

3. On the playground, raise a hand or whistle to indicate Line up.

Answered: 1 week ago

Question

Do not get married, wait until I come, etc.

Answered: 1 week ago

Question

Do not come to the conclusion too quickly

Answered: 1 week ago

Question

Engage everyone in the dialogue

Answered: 1 week ago