Indicate whether each of the following statements is true or false. If it is fal
ID: 1130228 • Letter: I
Question
Indicate whether each of the following statements is true or false. If it is false, you must explain (you can use equations as part of an explanation when needed) why is it false. Not explaining is the same thing as not answering. If it is true, no explanation is needed:
e. The Romer model performs better than the Solow growth model to explain the process of economic growth of any economy.
f. In the long run, the actions from the central bank (increasing or decreasing the money supply), don´t have any real effect on the economy.
g. If the investors around the world perceive a higher risk of a new crisis in Europe, the net exports of the US will increase.
h. If the German bonds yield 5% per year, and the French bonds yield 4.5%, then the investors will necessarily prefer to buy the German bonds.
i. If the FED decreases the interest rate, then the US net exports will increase.
j. If Saudi Arabia decides to sharply cut their oil supply, the Phillips curve will shift to the right.
Explanation / Answer
e) True
f) True
g) True
h) False
Other factors might be considered when investing. They include, market conditions in the two economies, economic and political stability, transaction costs and exchange rate.