Question

1. Consider the following cases and indicate for each case the direction and amount of changes in NX and NCO for the U.S. (e.g. NX decreases by $2, NCO increases by $3, etc.). Please circle your final numerical answers and explain how you arrived at the numerical answers a. The Norwegian government uses $500,000 of previously obtained U.S. dollars to buy $500,000 of police cars from a U.S. company. b. A department store chain in Japan uses yen to purchase 500,000 U.S. dollars from a U.S. bank. It then uses these dollars to buy DVDs from a U.S. filmmaker. c. A U.S. bank loaned a Canadian oil company 1 million U.S. dollars. The Canadian company then used the entire loan to buy mining equipment from a U.S. company.

Answer 1

a)

NX increase by$500,000

NCO decrease by $500,000

b)

NX increase by $500,000

NCO decrease by $500,000

c)

NX increase by 1 million

NCO first increase then decrease by 1 million