Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Problem Set 8 Roy Hendro B W – 18/423483/EK/21807
1. Would each of the following transactions be included in net exports or net capital outflow? Be
sure to say whether it would represent an increase or a decrease in that variable.
(a) An American buys a Sony TV. So, a U.S. citizen buying a good produced in Japan (Sony is
a Japanese company). Thus, imports increase and exports unchanged, it will make net exports (
NX ) decreases.
(b) An American buys a share of Sony stock. When a U.S. citizen buying a foreign asset (Sony
is a Japanese company), it makes net capital outflow increases (Net capital Outflow) .
(c) The Sony pension fund buys a bond from the U.S. Treasury. When a foreign company
buying a U.S. asset (U.S. Treasury bond), the net capital outflow decreases or Net Capital Inflow
happened.
(d) A worker at a Sony plant in Japan buys some Georgia peaches from an American farmer.
A foreign citizen (worker at Sony plant) buying American goods, so U.S. exports increase and
imports unchanged. It will make Net exports increase.
2. How would the following transactions affect U.S. net capital outflow? Also, state whether each
