Question

ECO - 252 - Macroeconomics.

7. True/False statements. Simply state if the statement is true or false. No explanation required.

a. An increase in U.S. net exports decreases the supply of dollars.

b. If net exports are negative, foreign assets bought by Americans are greater than American assets bought by foreigners.

c. A decrease in a country's real interest rate reduces net capital outflow.

d. If a U.S. resident buys a foreign bond, this action is included in the U.S. demand for loanable funds.

e. Trade policies do not alter the national saving or domestic investment of the country that implement them.

f. The variable that links the market for loanable funds and the foreign-currency exchange market is net capital outflow.

g. If Kenya experienced capital flight, the supply of Kenyan Schillings in the market for foreign currency exchange would shift left.

h. A drop in the Peruvian real interest rate increases Peruvian net capital outflow.

i. Capital flight from Cuba would cause the Cuban currency to depreciate.

j. If a country holds down the value of its own currency, the goods produced by that country become more expensive.

k. A higher U.S. real exchange rate makes U.S. goods more expensive.

Answer 1

a. An increase in U.S. net exports decreases the supply of dollars.
false
b. If net exports are negative, foreign assets bought by Americans are greater than American assets bought by foreigners. ---true

c. A decrease in a country's real interest rate reduces net capital outflow.-- false  

d. If a U.S. resident buys a foreign bond, this action is included in the U.S. demand for loanable funds. --true

e. Trade policies do not alter the national saving or domestic investment of the country that implement them.-- true

f. The variable that links the market for loanable funds and the foreign-currency exchange market is net capital outflow. --- true
g. If Kenya experienced capital flight, the supply of Kenyan Schillings in the market for foreign currency exchange would shift left.---- false

h. A drop in the Peruvian real interest rate increases Peruvian net capital outflow.--- false