Asked by MaryJean Throm on May 19, 2024
Verified
Statement I: A lower dollar makes American stocks,bonds,and real estate more expensive to foreigners.
Statement II: As our net indebtedness to foreigners grows,the net outflow of factor payments will grow.
A) Statement I is true and statement II is false.
B) Statement II is true and statement I is false.
C) Both statements are true.
D) Both statements are false.
Net Indebtedness
The total amount of borrowed money minus assets or reserves, indicating a person's, company's, or country's financial obligations.
Factor Payments
Payments made to the factors of production, such as wages to labor, rent to landowners, interest to capital, and profits to entrepreneurs.
- Discover how changes in a country's currency strength affect the pricing of its imports and exports.
- Explain how changes in exchange rates impact international investments and trade dynamics.
Verified Answer
NF
Nezzie FergusonMay 21, 2024
Final Answer :
B
Explanation :
Statement I is false because a lower dollar actually makes American stocks, bonds, and real estate less expensive to foreigners, making them more attractive investments. Statement II is true because as the U.S. borrows more from abroad (increasing its net indebtedness), the payments it must make on this debt (interest and dividends) will increase, leading to a larger net outflow of factor payments.
Learning Objectives
- Discover how changes in a country's currency strength affect the pricing of its imports and exports.
- Explain how changes in exchange rates impact international investments and trade dynamics.