Q4 When Australia sells wheat to the U.S., then U.S. net exports increase, and U
ID: 2440688 • Letter: Q
Question
Q4
When Australia sells wheat to the U.S., then U.S. net exports
increase, and U.S. net capital outflow increases.
increase, and U.S. net capital outflow decreases.
decrease, and U.S. net capital outflow increases.
decrease, and U.S. net capital outflow decreases.
Q7
If households decide to start holding more money, then
the interest rate rises and investment increases.
the interest rate falls and investment increases.
the interest rate rises and investment decreases.
the interest rate falls and investment decreases.
a.increase, and U.S. net capital outflow increases.
b.increase, and U.S. net capital outflow decreases.
c.decrease, and U.S. net capital outflow increases.
d.decrease, and U.S. net capital outflow decreases.
Explanation / Answer
Net capital outflow and net exports are directly related. When Australia sells wheat to the U.S., net exports for the US would fall as imports are increased. This also implies that Net capital outflow would decrease. Option D
When household are holding more money, they are demanding more money so money demand shifts right. This raises interest rate and reduces investment Option C.
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