Question 10 Initially, there is a negative net capital outflow in a small open economy with...
Question 10 Initially, there is a negative net capital outflow in a
small open economy with a perfect capital mobility. Suppose an
investment tax credit is introduced to give a tax advantage to any
firm building a new factory or buying a new piece of equipment.
Which of the following statement is correct in the loanable funds
market?
A. Savings increase and investment increases.
B. Savings decrease and investment increases.
C. Savings increase and investment remains unchanged.
D. Savings remain unchanged and investment decreases.
E. None of the above is correct
Homework Answers
The relationship between savings, investment, and net capital outflow can be given by the identity: S = I + NCO
Now, NCO < 0
An investment tax credit makes investment more attractive for investors, Therefore I should increase. Foreigners also invest more, thus NCO becomes more negative. Therefore, savings may increase or decrease depending on the relative magnitudes of I and NCO. Therefore, Option e) is correct.
Add Answer to:
Question 10 Initially, there is a negative net capital outflow in a
small open economy with...
If an investment tax credit is introduced to give a tax advantage to any firm building...
If an investment tax credit is introduced to give a tax advantage to any firm building a new factory or buying a new piece of equipment, which of the following statement is correct in a loanable fund market? A. Investment increases & savings decrease. B. Investment increases & savings increase. C. Investment decreases & savings decrease. D. Investment decreases & savings increase. E. None of the above is correct.
Question 14 Initially, there is a balanced trade in a small open economy with a perfect...
Question 14 Initially, there is a balanced trade in a small open economy with a perfect capital mobility. Suppose the world interest rate rw increases. Which of the following statement is correct? A. NX becomes positive. B. NX becomes negative. C. NX remains zero. D. It does not provide sufficient information to conclude if NX is positive, negative, or zero. E. None of the above is correct
Question 12 Initially, there is a trade surplus in a small open economy with a perfect...
Question 12 Initially, there is a trade surplus in a small open economy with a perfect capital mobility. Suppose the world interest rate rw increases. Which of the following statement is correct? A. NX remains positive. B. NX becomes negative. C. NX becomes zero. D. It does not provide sufficient information to conclude if NX is positive, negative, or zero. E. None of the above is correct
Macroland is a small open economy with perfect capital mobility and a fixed-exchange-rate system. Macroland is...
Macroland is a small open economy with perfect capital mobility and a fixed-exchange-rate system. Macroland is initially in the long-run equilibrium at the natural level of output with balanced trade. With the help of an appropriate diagram, compare the impact of a tax cut in the short run (when prices are fixed) and in the long run (when prices are flexible) on: 1. Output, 2. Consumption, 3. Investment, 4. Net exports 5. Exchange rate.
Suppose the small open economy Iceland has perfect financial capital mobility and no risk premium. Some...
Suppose the small open economy Iceland has perfect financial capital mobility and no risk premium. Some of their information is: C = 150 + 0.60(Y – T) – 25r I = 200 – 75r d) Draw two diagrams depicting long-run equilibrium, one for the domestic loanable funds market in Iceland and one for the foreign exchange market. In each diagram clearly label the initial long-run equilibrium from part A/B & the both new long-run equilibria from part C. Has the...
14. Consider the open-economy loanable funds model with flexible prices and capital mobility. Suppose that the...
14. Consider the open-economy loanable funds model with flexible prices and capital mobility. Suppose that the world consists of a small open economy (we call this domestic) and the rest of the world (we call this foreign). Answer the following questions with the aid of figures where appropriate a. How does an increase in domestic government expenditure affect trade balance and real exchange rate? (2 points] b. How does an increase in foreign government expenditure affect the trade balance and...
Question 2 Because resources are scarce, the opportunity cost to an economy of investment in capital...
Question 2 Because resources are scarce, the opportunity cost to an economy of investment in capital assets is zero. forgone future consumption. forgone present consumption. infinite. According to Figure 1 below, as the economy moves from Po A to Point E, the opportunity cost of motorcycles, measured int o ondan Hybrid cars Motorcycles Figure 1 decreases increases remains constant initially increases, then decreases estion 4 Refer to Table 1 below. Table 1 Molly Pete Avatar Design Tattoo Design Which of...
which of the following statements about the loanable funds market is (are) correct? (x) When the...
which of the following statements about the loanable funds market is (are) correct? (x) When the supply of loanable funds shifts to the right then the equilibrium real interest rate decreases and the equilibrium quantity of loanable funds decreases. (y) When the demand for loanable funds shifts to the right then the equilibrium real interest rate increases and the equilibrium quantity of loanable funds increases. (z) If the demand for loanable funds shifts to the right and the supply of...
which of the following statements about the loanable funds market is (are) correct? (x) When the...
which of the following statements about the loanable funds market is (are) correct? (x) When the supply of loanable funds shifts to the right then the equilibrium real interest rate decreases and the equilibrium quantity of loanable funds decreases. (y) When the demand for loanable funds shifts to the right then the equilibrium real interest rate increases and the equilibrium quantity of loanable funds increases. (z) If the demand for loanable funds shifts to the right and the supply of...
< Back to Assignment Attempts: Average: 12 4. Net capital outflow and net exports An open...
< Back to Assignment Attempts: Average: 12 4. Net capital outflow and net exports An open economy interacts with the rest of the world through its involvement in world markets for goods and services and world financial markets. Although it can often result in an imbalance in these markets, the following identity must remain true: Net Capital Outflow Net Exports In other words, ir a transaction directly affects the left side of this equation, then it must also affect the...
14. Consider the open-economy loanable funds model with flexible prices and capital mobility. Suppose that the world consists of a small open economy (we call this domestic) and the rest of the world (we call this foreign). Answer the following questions with the aid of figures where appropriate a. How does an increase in domestic government expenditure affect trade balance and real exchange rate? (2 points] b. How does an increase in foreign government expenditure affect the trade balance and...
Question 2 Because resources are scarce, the opportunity cost to an economy of investment in capital assets is zero. forgone future consumption. forgone present consumption. infinite. According to Figure 1 below, as the economy moves from Po A to Point E, the opportunity cost of motorcycles, measured int o ondan Hybrid cars Motorcycles Figure 1 decreases increases remains constant initially increases, then decreases estion 4 Refer to Table 1 below. Table 1 Molly Pete Avatar Design Tattoo Design Which of...
< Back to Assignment Attempts: Average: 12 4. Net capital outflow and net exports An open economy interacts with the rest of the world through its involvement in world markets for goods and services and world financial markets. Although it can often result in an imbalance in these markets, the following identity must remain true: Net Capital Outflow Net Exports In other words, ir a transaction directly affects the left side of this equation, then it must also affect the...
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 10 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 10 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 10 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 10 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 10 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 10 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 10 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 10 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 10 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 10 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 10 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 10 months ago