QUESTION 3

1. The examples below are all examples of a U.S. capital outflow except

a.

General Motors invests in an automobile plant in France.

b.

All answers are capital outflows.

c.

Charles Schwab, Inc., invests mutual fund money in the Japanese stock market.

d.

Microsoft opens a new office in Detroit.

QUESTION 4

1. Suppose the value of the Polish zloty moves from Z 1100 = $1 at the start of the year to Z 1750 at the end of the year. At the same time, the Polish price level changes from an index of 100 on January 1 to 128 on December 31. U.S. inflation during the year was 4.2%. If the one-year interest rate on the zloty is 46%, what was the real dollar cost of borrowing the zloty during the year?

a.

17.53%

b.

27.81%

c.

-11.93%

d.

-8.76%