EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 39, Problem 10RQ
To determine
The impact of the continuous trade deficit of the US.
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Assume a U.S. firm buys (imports) $5 million (in U.S. dollars) of foreign goods. That transaction by itself increasesthe trade deficit by $5 million. But, the $5 million will flow back to the United States to purchase either (i) U.S. goodsand services or (ii) U.S. assets.• How does the way the $5 million comes back to the United States determine whether there will be balancedtrade or a trade deficit?• How does the U.S. economy benefit from either transaction (the foreign purchase of U.S. goods and services[exports] or the purchase of U.S. assets)?
Assume that the U.S. interest rate is 12 percent, while the British interest rate is 15 percent. If interest rate parity exists, then: O a.U.S. investors will earn 12 percent whether they use covered interest arbitrage or invest in the United States. O b. U.S. investors will earn a higher rate of return when using covered interest arbitrage than what they would earn in the United States. O c. British investors who invest in the United Kingdom will achieve the same return as U.S. investors who invest in the United States. O d. U.S. investors will earn 15 percent whether they use covered interest arbitrage or invest in the United States.
If Canadian exports of goods and services were $37 billion, imports of goods and services were $42 billion, transfers by Canadians to foreigners were $3 billion and
transfers from foreigners to Canadian citizens were $2 billion, then the current account balance would be
O A. $4 billion.
O B. - $6 billion.
O C. $8 billion
O D. $6 billion.
O E. - $4 billion.
Chapter 39 Solutions
EP ECONOMICS,AP EDITION-CONNECT ACCESS
Ch. 39.1 - Prob. 1QQCh. 39.1 - Prob. 2QQCh. 39.1 - Prob. 3QQCh. 39.1 - Prob. 4QQCh. 39 - Prob. 1DQCh. 39 - Prob. 2DQCh. 39 - Prob. 3DQCh. 39 - Prob. 4DQCh. 39 - Prob. 5DQCh. 39 - Prob. 6DQ
Ch. 39 - Prob. 7DQCh. 39 - Prob. 8DQCh. 39 - Prob. 9DQCh. 39 - Prob. 10DQCh. 39 - Prob. 11DQCh. 39 - Prob. 1RQCh. 39 - Prob. 2RQCh. 39 - Prob. 3RQCh. 39 - Prob. 4RQCh. 39 - Prob. 5RQCh. 39 - Prob. 6RQCh. 39 - Prob. 7RQCh. 39 - Prob. 8RQCh. 39 - Prob. 9RQCh. 39 - Prob. 10RQCh. 39 - Prob. 1PCh. 39 - Prob. 2PCh. 39 - Prob. 3PCh. 39 - Prob. 4PCh. 39 - Prob. 5P
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