QUESTION 2 An increase in the KSA real interest rate induces Saudis to buy more
ID: 1122816 • Letter: Q
Question
QUESTION 2
An increase in the KSA real interest rate induces
Saudis to buy more foreign assets, which reduces KSA net capital outflow.
Foreigners to buy more KSA assets, which increases KSA net capital outflow.
Foreigners to buy more KSA assets, which reduces KSA net capital outflow.
Saudis to buy more foreign assets, which increases KSA net capital outflow.
QUESTION 3
An increase in the budget deficit
Reduces net capital outflow and domestic investment.
Reduces net capital outflow and raises domestic investment.
Raises net capital outflow and reduces domestic investment.
Raises net capital outflow and domestic investment
QUESTION 4
If a country’s budget deficit increases, then in the foreign exchange market,
The supply of its currency shifts left, so the exchange rate rises.
The demand for its currency shifts left, so the exchange rate falls.
The demand for its currency shifts right, so the exchange rate rises.
The supply of its currency shifts right, so the exchange rate falls.
QUESTION 5
If purchasing power parity holds, a bushel of rice costs $10 in the U.S., and the nominal exchange rate is 0.5 Thai bhat per dollar, what is the price of rice in Thailand?
20 bhat
2 bhat
5 bhat
10 bhat
QUESTION 6
If the U.A.E were to impose import quotas
The demand for loanable funds would increase, but the demand for dirhams in the market for foreign-currency exchange would not.
Neither the demand for loanable funds nor the demand for dirhams in the market for foreign-currency exchange would increase.
The demand for dirhams in the market for foreign-currency exchange would increase, but the demand for loanable funds would not.
The demand for loanable funds and the demand for dirhams in the market for foreign currency exchange would both increase.
QUESTION 7
In the United States, a three-pound can of coffee costs about $10. If the exchange rate is about 1.2 euros per dollar and a three-pound can of coffee in Belgium costs about 16 euros. What is the real exchange rate?
4/5 cans of Belgian coffee per can of U.S. coffee
4/3 cans of Belgian coffee per can of U.S. coffee
3/4 cans of Belgian coffee per can of U.S. coffee
5/4 cans of Belgian coffee per can of U.S. coffee
QUESTION 8
Net capital outflow is defined as the purchase of
Foreign assets by domestic residents minus the purchase of domestic assets by foreign residents.
Foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents.
Domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.
Domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents.
QUESTION 9
Other things the same, if a country saves less, then
Net capital outflow rises, so net exports rise.
Net capital outflow rises, so net exports fall.
Net capital outflow falls, so net exports fall.
Net capital outflow falls, so net exports rise.
Saudis to buy more foreign assets, which reduces KSA net capital outflow.
Foreigners to buy more KSA assets, which increases KSA net capital outflow.
Foreigners to buy more KSA assets, which reduces KSA net capital outflow.
Saudis to buy more foreign assets, which increases KSA net capital outflow.
Explanation / Answer
2)An increase in the KSA real interest rate induces
Saudis to buy more foreign assets, which increases the KSA net capital outflow
3)An increase in the budget deficit
Reduces the net capital outflow and domestic investment
This happens due to the phenomenon called crowding out. the quantity of private investment is reduced.
4)If a country's budget deficit increases, then in the foreign exchange market
The supply of its currency shifts left, so the exchange rate rises.
5) 5 bhat
Rice price in US is $10 with exchnage value at 0.5 bhat, so in thailand the price will be 10*0.5 = 5 bhat
6)If the UAE were to impose import quotas
The demand for dirhams in the market for foreign currency exchange would increase, but the demand for loanable funds would not
7) 3/4 cans of Belgian coffee per can of US Coffee
can in US is $10 with exchange rate as 1.2 euros which will be 12 euros and belgium is 16 euros, thus the real exchange rate will be 12/16 = 3/4
8) Net capital outflow is defined as the purchase of
Foreign assets by domestic residents minus the purchase of domestic assets by foreign residents.
This happens as every international transaction involves an exchange of an asset for a good or servie and it equals the net exports.
9)Other things the same, if a country saves less, then
Net capital outflow rises, so net exports rise
If a country saves less that means the funds have gone somewhere, that is due to net capital outflow and the net exports both are positive.