Macroeconomics Answers

Real interest rates in France rise faster than interest rates in the U.S.
What happens to capital flows in this scenario, eventually, due to the change in value of its currency?
Graphically illustrate the change in the loanable funds market for the U.S. given the information gathered in question A. Be sure to label your graph.
What impact did this have on domestic real interest rate?

Using the same scenarios from questions 3-5. Answer the following questions involving the loanable funds market.
An increase in British imports of American goods.
What happens to capital flows initially in this scenario? (Which country is experiencing capital inflow and outflow)
Graphically illustrate the change in the loanable funds market for the U.S. given the information gathered in question A. Be sure to label your graph.
What impact did this have on domestic real interest rate?

Identify whether each transaction would be classified in the current account or the capital and financial account in a nation’s balance of payments, and would it be listed as a credit or a debit for the US.:
A) Honda pays $5 million to an American shipping company to transport goods to other countries
B) Americans increase purchases of products from Sony, a Japanese electronics company.
C) Ford purchases a factory in Mexico
D) Mr. McRitchie buys a vacation home in Greece and plans on using Airbnb to make some money off of it renting it out
E) Benny Batson, a US citizen, makes money off of his foreign investments
F) The U.S. government sends foreign aid out to Israel due to conflict within the country

If a country has a current account deficit, which of the following must be true?
a. It must also show a deficit in its capital account
b. It must show a surplus in its capital account
c. It must increase the purchases of foreign goods and services.
d. It must increase the domestic interest rates on its bonds.
e. It must limit the flow of foreign capital investment.

If the exchange rate of $/pound increases, United States imports from and exports to the United Kingdom will change in which of the following ways?
Imports will increase, exports will decrease
Imports will increase, exports will increase
Imports will increase, exports won’t change
Imports will decrease, exports will increase

An increase in China’s demand for American goods would cause the value of the dollar to
Appreciate because of inflation
Appreciate because China would be buying more dollars
Depreciate because the U.S. would be selling more dollars to China
Depreciate because of an increase in the U.S.’s supply of money in the forex market

Which of the following will happen in the forex market for the Euro if Germans want to buy American copper:
a. Demand for the euro increases
b. Demand for the euro decreases
c. Supply for the euro increases
d. Supply for the euro decreases

State whether the following statement is true or false and support your answer with facts and figure:
‘‘In the past few decades, primary sector has created maximum jobs in Pakistan.’’

What do a rubbernecking traffic jam and the paradox of thrift have in common

Explain how the interest rate works in the classical system to stabilize aggregate demand in
the face of autonomous changes in component of aggregate demand such as investment or
government spending.