Asked by Jasmine Sarmientos on May 05, 2024
Verified
A U.S. mutual fund uses $1 million to buy yen from a Japanese bank. It then uses these yen to buy stocks in a Japanese electronics firm. The Japanese electronic firm then exchanges the $1 million dollars of yen for dollars from a U.S. bank. It uses these dollars to buy equipment manufactured by a company located in the U.S.
As a result of these exchanges, by how much, if at all, and in which direction does:
A. U.S. net exports change?
B. U.S. net capital outflow change?
Net Capital Outflow
The difference between a country's total exports of capital and total imports of capital during a specific time period.
Net Exports
The value of a country's total exports minus the value of its total imports.
Mutual Fund
An institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds.
- Assess the factors that govern net exports and net capital outflows.
- Determine the implications of currency exchanges and investment for net capital outflow.
Verified Answer
RM
Riley MarshallMay 11, 2024
Final Answer :
A. U.S. net exports rise by $1 million.
B. U.S. net capital outflow rise by $1 million.
B. U.S. net capital outflow rise by $1 million.
Learning Objectives
- Assess the factors that govern net exports and net capital outflows.
- Determine the implications of currency exchanges and investment for net capital outflow.