Question

1. Which of the following statements is (are) correct?
(x) In the open-economy model, the key determinant of net capital outflow is the real interest rate.
(y) When the U.S. real interest rate decreases and is low, owning U.S. assets is less attractive and so U.S. net capital outflow is relatively high.
(z) Ceteris paribus, if the German real interest rate were to increase, German net capital outflow would fall and net capital outflow of other countries would rise.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (y) only

In the open economy macroeconomic model of the textbook, which of the following is included in the demand for U.S. dollars in the market for foreign-currency?
(x) A retail outlet in Canada wants to buy computers from a U.S. computer manufacturer.
(y) ABC Securities, a U.S. stock brokerage, wants to purchase stock issued by a French corporation.
(z) A United States bank that has branch offices in Mexico and Canada loans dollars to Tom, a resident of the United States, who wants to purchase a new car that was made in the United States.
A. (x), (y) and (z) B. (x) and (y) only
C. (x) and (z) only D. (y) and (z) only
E. (x) only

Which of the following statements is (are) correct?
(x) If at a given real interest rate desired national saving equals $50 billion, domestic investment equals $40 billion, and net capital outflow equals $20 billion, then at that real interest rate in the loanable funds market there would be a shortage and the real interest rate would rise.
(y) As the real interest rate falls, domestic investment rises and net capital outflow falls.
(z) If the quantity of loanable funds supplied is greater than the quantity demanded, then there is a surplus of loanable funds and the interest rate will fall.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only

Answer 1

1. Which of the following statements is (are) correct?
(x) In the open-economy model, the key determinant of net capital outflow is the real interest rate.
(y) When the U.S. real interest rate decreases and is low, owning U.S. assets is less attractive and so U.S. net capital outflow is relatively high.
(z) Ceteris paribus, if the German real interest rate were to increase, German net capital outflow would fall and net capital outflow of other countries would rise.
A. (x), (y) and (z) - This is the right answer is real interest rate is a key determinant of net capital outflow and capital flows towards the country which has higher real interest rates
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (y) only

In the open economy macroeconomic model of the textbook, which of the following is included in the demand for U.S. dollars in the market for foreign-currency?
(x) A retail outlet in Canada wants to buy computers from a U.S. computer manufacturer.
(y) ABC Securities, a U.S. stock brokerage, wants to purchase stock issued by a French corporation.
(z) A United States bank that has branch offices in Mexico and Canada loans dollars to Tom, a resident of the United States, who wants to purchase a new car that was made in the United States.
A. (x), (y) and (z) B. (x) and (y) only
C. (x) and (z) only D. (y) and (z) only
E. (x) only - This is the right answer. y doesn't refer to a transaction which leads to demand for US dollar, adn z doesn't refer to a transaction in the market for foreign currency, as it is a domestic transaction

Which of the following statements is (are) correct?
(x) If at a given real interest rate desired national saving equals $50 billion, domestic investment equals $40 billion, and net capital outflow equals $20 billion, then at that real interest rate in the loanable funds market there would be a shortage and the real interest rate would rise.
(y) As the real interest rate falls, domestic investment rises and net capital outflow falls.
(z) If the quantity of loanable funds supplied is greater than the quantity demanded, then there is a surplus of loanable funds and the interest rate will fall.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only - this is the right answer
D. (y) and (z) only
E. (x) only