4. Net capital outow and net exports An open economy interacts with the rest of the wortd through its involvement in world markets for goods and services and world financial markets. Although it can often result in an imbalance in these markets, the following identity must remain true: Net Capital Outow 2 Net Exports In other words, if a transaction directly affects the left side of this equation, then it must also affect the right side. The following problem will help you understand whyr this identity must hold. Suppose you are a software engineer living in Canada, and you just sold your latest product to a Russian consumer for RUB 75,000. Determine the ei'TeCts of this transaction on exports, imports, and net exports in the Canadian economy, and enter your results in the foiu'owing 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 (Rubles) Exports _v E m... _v E mm _v 2 Because of the identity equation that relates to net exports, the V in Canadian net exports is matched by V in Canadian net capital outow. which of the following is an example of how Canada might be affected in this scenario? Check all that appiy. C] You purchase RUB 7,000 worth of stock in a Russian corporation. C] You store the rubles in your safety deposit box at home. C] You buy RUB 7,000 worth of Russian bonds. Magnitude of Change Direction of Change (Rubles) Exports Imports Decrease Net Exports Increase Because of the ident at relates to net exports, the in Canadian net No change net capital outflow. bllowing is an example of how Canada might be affected in this You purchase RUB 7,000 worth of stock in a Russian corporation. You store the rubles in your safety deposit box at home. You buy RUB 7,000 worth of Russian bonds.Magnitude of Change Direction of Change (Rubles) Exports Imports Net Exports Decrease Because of the identi Increase hat relates to net exports, the in net capital outflow. V ollowing is an example of how Canada might be a No change You purchase RUB 7,000 worth of stock in a Russian corporation. You store the rubles in your safety deposit box at home. You buy RUB 7,000 worth of Russian bonds.Hint: The magnitude of change should always be positive, regardless of the dir Magnitude of Change Direction of Change (Rubles) Exports Imports Net Exports Decrease Because of the identi hat relates to net exports, the net capital outflow. V Increase pllowing is an example of how Canada might b You purcha No change worth of stock in a Russian corporation. You store the rubles in your safety deposit box at home. You buy RUB 7,000 worth of Russian bonds.Because of the identity equation that relates to net exports, the in Canadian net exports is matched by in Canadian net capital outflow. Which of the following is an example of how ht be affected in this scenario? Check all that apply. increase You purchase RUB 7,000 worth of stock in a Russian c decrease You store the rubles in your safety deposit box at home. You buy RUB 7,000 worth of Russian bonds.Because of the identity equation that relates to net exports, the in Canadian net exports is matched by in Canadian net capital outflow. Which of the following is an example of how Canada might be affected in this scenario? Check all th an increase You purchase RUB 7,000 worth of stock in a Russian corporation. a decrease You store the rubles in your safety deposit box at home. You buy RUB 7,000 worth of Russian bonds
