Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Question
Chapter 13, Problem 5RQ
To determine
To Explain: The means by which a nation’s net exports could be affected by an increase in its domestic income and foreign income at a given real exchange rate.
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Consider that the home country increased government expenditures. Analyze its effects on net exports and real exchange rate using graphs. Describe briefly.
Studies indicate that net exports and net capital outflows tend to be equal.
1. Explain why net exports and net capital outflows always tend to be equal.
2. Explain how a change in interest rates can lead to changes in net exports?
Suppose that a country experiences inflation while the nominal exchange rate and the price level in its trading partner remain unchanged. What will happen to the country's real exchange rate and to net exports?
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- Would each of the following transactions be included in net exports or net capital outflow? Be sure to say whether it would represent an increase or a decrease in that variable. A) A Malaysian buys a Sony TV. B) A Malaysian buys a share of Sony stock. C) The Japan pension fund buys a bond from the Malaysian treasury. D) A Japanese buys some durians from a Malaysian farmer.arrow_forwardThe exchange rate at the beginning of the year was SF1.0000/$. The price level of a typical consumption basket in Switzerland was SF120/SFCB and the price level of a typical consumption basket in the United States was also $100/$CB at the beginning of the year. Calculate the real exchange rate at the beginning of the year. SFCB0.6667/$CB SFCB0.8333/$CB SFCB1.0000/$CB SFCB1.3333/$CB SFCB1.6667/$CBarrow_forward
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