Figure 32-3 Refer to this diagram of the open-economy macroeconomic model to answer the questions below....
Figure 32-3
Refer to this diagram of the open-economy macroeconomic model to answer the questions below.
Refer to Figure 32-3. The curve in panel b shows that as the interest rate rises,
| a. |
domestic investment declines. |
|
| b. |
net capital outflow declines. |
|
| c. |
net capital outflow and domestic investment decline. |
|
| d. |
None of the above is correct. |
Homework Answers
The curve in panel 'b' represents NCO (Net Capital Outflow).
NCO is negatively related to the interest rate.
So, net capital outflow (NCO) declines as the interest rate rises.
Answer: Option (B)
Add Answer to:
Figure 32-3
Refer to this diagram of the open-economy macroeconomic model to
answer the questions below....
3. Recall the small open economy model we considered, and answer the following questions for a...
3. Recall the small open economy model we considered, and answer the following questions for a small open economy named Atlas. For each of the slots labeled (a) through (d), indicate whether the policy listed to the leftmost column causes the variable listed in the upper row to rise, fall, or remain unchanged, and provide an explanation for your answer in each case. (13 pts) Atlas domestic Atlas net capital Atlas real exchange Atlas net exports investment (3pts) outflow (3pts)...
Recall the small open economy model we considered, and answer the following questions for a small...
Recall the small open economy model we considered, and answer the following questions for a small open economy named Atlas. For each of the slots labeled (a) through (d), indicate whether the policy listed to the leftmost column causes the variable listed in the upper row to rise, fall, or remain unchanged, and provide an explanation for your answer in each case. (13 pts) Atlas domestic investment (3pts) Contractionary a fiscal in Atlas Atlas net capital outflow (3pts) b Atlas...
According to the open economy macroeconomic model, which of the following statements is (are) correct? (x)...
According to the open economy macroeconomic model, which of the following statements is (are) correct? (x) The usual effects of capital flight include a rightward shift of demand in the loanable funds market and a rightward shift of the NCO curve, (y) Capital flight typically causes a decrease in the domestic interest rate and an increase in NCO. (z) Capital flight typically causes the real exchange rate of the domestic currency to depreciate because capital flight causes an increase in...
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In the open-economy macroeconomic model, if the supply of loanable funds shifts right Group of answer choices the interest rate falls and the supply of dollars in the market for foreign-currency exchange shifts right. the interest rate falls and the supply of dollars in the market for foreign currency exchange shifts left. the interest rate rises and the demand for dollars in the market for foreign currency exchange shifts right. the interest rate rises and the demand for dollars in...
7. Suppose that Canada imposes an import quota on automobiles. In the open-economy macroeconomic model, which of...
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8. In a small open economy, if the world real interest rate is above the rate...
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14. Consider the open-economy loanable funds model with flexible prices and capital mobility. Suppose that the...
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Refer to the diagram that shows an ADIAS model fora hypothetical economy The economy begins in...
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3. Recall the small open economy model we considered, and answer the following questions for a small open economy named Atlas. For each of the slots labeled (a) through (d), indicate whether the policy listed to the leftmost column causes the variable listed in the upper row to rise, fall, or remain unchanged, and provide an explanation for your answer in each case. (13 pts) Atlas domestic Atlas net capital Atlas real exchange Atlas net exports investment (3pts) outflow (3pts)...
8. In a small open economy, if the world real interest rate is above the rate at which national saving exceeds domestic investment, then there will be a trade _and net capital outflow. A) surplus; negative B) deficit; positive C) surplus, positive D) deficit; negative
14. Consider the open-economy loanable funds model with flexible prices and capital mobility. Suppose that the world consists of a small open economy (we call this domestic) and the rest of the world (we call this foreign). Answer the following questions with the aid of figures where appropriate a. How does an increase in domestic government expenditure affect trade balance and real exchange rate? (2 points] b. How does an increase in foreign government expenditure affect the trade balance and...
Refer to the diagram that shows an ADIAS model fora hypothetical economy The economy begins in long-run equilibrium at point A AS1 Following the positive AS shock shown in the diagram, the adjustment process will take the economy to a long-run equilibrium where the price level is AS2 and real GDP is O A. 100; 750 B. 70; 500 O C. 50; 850 O D. 50; 950 O E. 70; 750 100 . 70 50 AD 500 750 850 Real...
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