110g s8sem Heading 1 Heading 2Title Subtitle Paragraph Styles 8. US residents pu
ID: 1119919 • Letter: 1
Question
110g s8sem Heading 1 Heading 2Title Subtitle Paragraph Styles 8. US residents purchase $2,000 in stocks of Japanese firms and $1,500 in stocks of Canadian frms. Biggby Coffee (Lansing company) opens a coffee shop in Montreal, Canada, using $500 and Caterpillar (firm based in US) builds a factory in Mexico using $2,000. German residents purchase $3,000 in stocks of US firms, and Italian residents purchase $1.000 in stocks ofUS firms. The Japanese government purchases $1,000 in US government bonds, the Chinese government purchases $3,000 in US government bonds. The US government purchases $2,000 in Mexican bonds, and $1,000 in Brazilian bonds. BMW (of Germany) builds a plant in Michigan using $3,000. What is the Net Capital Outflow from the US2 How much of NCO is from Foreign Direct Investment? How much of NCO is from Foreign Portfolio Investment? Using this information what is your estimate of Net Exports for the US? 9. An economy has GDP of 10,000; consumption of 6,000: government purchases of 1,000 and investment of 2,500. a. Net Exports Net Capital Outflow b. What is the effect of an increase in the government purchases on Net Exports (Gncrease or Decrease) and on Net Capital Outflow (Increase or Decrease)Explanation / Answer
Answer 9: Net exports calculation:
GDP= Consumption+Investment+Government purchases+ net exports
Therefore , By going with the formula, 10000= 6000+2500+1000+net exports
Net exports= 10000-9500
= $500
Net Capital Outflow= $ 500 Because Each exchange that affects the net capital outflow also affects net exports in the same amount.
AnswerB) Increase in domestic economic growth cause an increase in imports in the current A/C .A fall in Net Exports or an increase in Current A/c deficit will cause the dollar to depreciate
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