Real interest rate Standard and Poor's reviewed the banking sector of Canada recently and ranked it score '2' due to its very low risk. Investors have welcomed the new grade at a time when very few developed economies are perceived as safe havens. Modify t three diagrams to describe the effects of ranking on Canada's open economy. Note that USD is United States dollars, CAD is Canadian dollars and NCO is net capital outflow. Demand Supply Quantity of loanable funds Real interest rate NCO Net capital outflow

Real interest rate Standard and Poor's reviewed the banking sector of Canada recently and ranked it score '2' due to its very low risk. Investors have welcomed the new grade at a time when very few developed economies are perceived as safe havens. Modify t three diagrams to describe the effects of ranking on Canada's open economy. Note that USD is United States dollars, CAD is Canadian dollars and NCO is net capital outflow. Demand Supply Quantity of loanable funds Real interest rate NCO Net capital outflow

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter29: Exchange Rates And International Capital Flows

Section: Chapter Questions

Problem 6SCQ: A booming economy can attract financial capital inflows, which promote further growth. However,...

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A booming economy can attract financial capital inflows, which promote further growth. However, capital can just as easily flow out of the country, leading to economic recession. Is a country whose economy is booming because It decided to stimulate consumer spending more or less likely to experience capital flight than an economy whose boom Is caused by economic investment expenditure?
Explain how the following transactions would affectU.S. net capital outflow. For each transaction, statewhether it represents direct investment or portfolioinvestment.a. An American cellular phone company establishesan office in the Czech Republic.b. Harrods of London sells stock to the GeneralMotors pension fund.c. Honda expands its factory in Marysville, Ohio.d. A Fidelity mutual fund sells its Volkswagen stockto a French investor.
Answer True, False or Uncertain. Brieáy explain your answer. In an international economy of perfectly substitutable currencies, an increase in the stock of one countryís money reduces real value of all monies.
Why would a nation “dollarize”—that is, adoptanother country’s currency instead of having its own?
The country's current account in its balance of payments showsA. the difference between the inflows and outflows of funds into the country's financial systemB. the net inflow of funds arising from the country financial transactions with the rest of the worldC. the two above choices are correctD. the two above choices are incorrect
Suppose a country's net exports are $400 billion, income receipts on investments are $780 billion, and income payments on investments are $1,200 billion. Suppose unilateral transfers are $250 billion. If all international transactions are recorded accurately in the balance of payments, what is the value of the financial account? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a -$20 billion b d -$270 billion $270 billion Need information on the flows of funds for real and financial investments to answer. Your answer
4. Net capital outflow and net exports An open economy interacts with the rest of the world through involvement in world financial markets, and also world markets for goods and services. Despite the fact that this involvement often results in an imbalance in these markets, the following identity must hold: Net Capital Out flow = Net Exports That is, any transaction that affects the left side of this equation must also affect the right side. The following problem provides a scenario that illustrates why this identity must remain true. Suppose you work as the purchasing manager for a national chain of buffet restaurants in the United States, and it is time to place your annual order of hot chili oil. You pay $2,500,000 for a shipment of chili oil from a producer in South Korea. Determine the effects of this transaction on exports, imports, and net exports in the U.S. economy, and direction of change is "No change," enter "0" in the Magnitude of Change column. Hint: The magnitude of…
2 provide an in-depth discussion of the factors affecting the performance of currencies in emerging markets and the impact on their economics...
_______Refers to the market for national currencies of different countries in the world?
Then what are the changes in the current account, the financial account and the BoP in the Netherlands over the time period described? And in this story, in which transactions does excess financial elasticity change the Dutch NIIP positions more than would be the case without excess financial elasticity?
In accordance with theprinciple of the balance of paymentsstatement,transactions involvingpayments made by foreign residentsdomestic residents shall be recorded in ( ) A.debit B.credit C.both debit and credit D.either side
closing case Megahertz Communications worried that Megahertz would not get paid on time, or at all, or that currency fluctuations would reduce the value of payments to Megahertz. Even when Megahertz had a letter of credit from the customer's bank and export insurance documentation, many lenders still saw the risks as too great and declined to lend bridging funds to Megahertz. As a partial solution, Megahertz turned to lending companies that specialize in financing international trade, but many of these companies charged interest rates significantly greater than those charged by banks, thereby squeezing Megahertz's profit margins. Coles hoped these financing problems were temporary. Once Megahertz established a more sustained cash flow from its international operations, and once banks better appreciated the ability of Coles and his team to secure payment from foreign customers, he hoped that they would become more amenable to lending capital to Megahertz at rates that would help to…