Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please complete the table with the explanation An open economy interacts with the rest of the world through its involvement in world markets for goods

Please complete the table with the explanation

image text in transcribed
An open economy interacts with the rest of the world 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 Outflow = 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 why this identity must hold. Suppose you are a fashion designer living in the United States, and a trendy boutique in Bangkok just purchased your entire inventory for THB 80,000. 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 (Baht) Exports Imports Net Exports Because of the identity equation that relates to net exports, the in U.S. net exports is matched by in U.S. net capital outflow. Which of the following is an example of how the United States might be affected in this scenario? Check all that apply. You exchange the THB 80,000 for dollars at your local bank, which then uses the foreign currency to purchase stock in a Thai corporation. You purchase THB 48,000 worth of stock in a Thai corporation and THB 32,000 worth of Thai bonds. O You store the Thai baht in your safety deposit box at home

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

Step: 3

blur-text-image

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

Global Capitalism Its Fall And Rise In The Twentieth Century

Authors: Jeffry Frieden

1st Edition

039332981X, 9780393329810

More Books

Students also viewed these Economics questions

Question

11.1 Explore the role of labor unions.

Answered: 1 week ago

Question

11.3 Discuss laws affecting collective bargaining.

Answered: 1 week ago