Naked Economics Chapter 18 Summary
1. Chapter 18 problem 1
a) Us net exports decrease when an American arts professor spends the summer touring museums in Europe. US imports increase when he spends the money buying foreign goods and services, while its exports unchanged.
b) US net exports increase when the students in Paris flock to see the latest movie from Hollywood. US exports rise as foreigners are buying a US good, and its imports remain unchanged
c) US net exports decline when the uncle buys a new Volvo. US imports rise when a US citizen buys a foreign good, while its exports remain unchanged.
d) US net exports increase when the student bookstore at the university sells a pair of 501 jeans. US exports rise as foreigners are buying a US good, and its imports remain …show more content…
unchanged.
e) US net exports increase when a Canadian citizen shops in northern Vermont to avoid Canadian sales taxes. US exports rise as foreigners are buying a US good, while its imports remain unchanged.
2. Chapter 18 problem 2
a) It represents a decrease in US net exports because it causes an increase in US imports from Japan.
b) It represents an increase in US capital outflow because it leads to a use of dollar to buy Sony stock.
c) It represents a decrease in US capital outflow because it leads to a use of yen to buy US, Treasury bond.
d) It represents an increase in US net exports because it causes an increase in US exports in japan.
3. Chapter 19 problem 2
Japan runs a significant trade surplus, which is mostly related to high foreign demand for Japanese goods. The international competitiveness of Japanese goods is high because of their superior quality. A high demand for Japanese goods, both from domestic as well as foreign buyers, increases net exports of Japan.
4. Chapter 19 problem 8
When the real interest increases across Europe, then this development will increase the US net capital outflow because of the fact that US assets become less attractive to the European assets and the foreign investors will move from us to Europe.
The supply of the dollar will increase, reducing the value of the dollar as compared to the Euro. The real interest rate in US will increase due to decrease in the supply of loanable funds caused by a movement of both foreign capital as well as domestic capital from us to Europe. The US real exchange rate will depreciate which will decrease its exports prices and increase its prices. However, US net exports will increase.
5. When the dollar gets stronger against major foreign currencies, does the price of French wine rise or fall in the United States? Would this be a good time to travel to Australia? What happens to US exports?
When dollar gets stronger, it attracts more exchange value against other currencies. The price of the French wine gets cheaper considered the appreciated of the US dollar. This is a very good time to visit since, the home country currency is stronger, would be able to get things at cheaper rate in the holiday.
Since the value of currency appreciated, more value has to be paid by other nations to purchase US products. However, exports would
decline.
a) Us net exports decrease when an American arts professor spends the summer touring museums in Europe. US imports increase when he spends the money buying foreign goods and services, while its exports unchanged.
b) US net exports increase when the students in Paris flock to see the latest movie from Hollywood. US exports rise as foreigners are buying a US good, and its imports remain unchanged
c) US net exports decline when the uncle buys a new Volvo. US imports rise when a US citizen buys a foreign good, while its exports remain unchanged.
d) US net exports increase when the student bookstore at the university sells a pair of 501 jeans. US exports rise as foreigners are buying a US good, and its imports remain …show more content…
unchanged.
e) US net exports increase when a Canadian citizen shops in northern Vermont to avoid Canadian sales taxes. US exports rise as foreigners are buying a US good, while its imports remain unchanged.
2. Chapter 18 problem 2
a) It represents a decrease in US net exports because it causes an increase in US imports from Japan.
b) It represents an increase in US capital outflow because it leads to a use of dollar to buy Sony stock.
c) It represents a decrease in US capital outflow because it leads to a use of yen to buy US, Treasury bond.
d) It represents an increase in US net exports because it causes an increase in US exports in japan.
3. Chapter 19 problem 2
Japan runs a significant trade surplus, which is mostly related to high foreign demand for Japanese goods. The international competitiveness of Japanese goods is high because of their superior quality. A high demand for Japanese goods, both from domestic as well as foreign buyers, increases net exports of Japan.
4. Chapter 19 problem 8
When the real interest increases across Europe, then this development will increase the US net capital outflow because of the fact that US assets become less attractive to the European assets and the foreign investors will move from us to Europe.
The supply of the dollar will increase, reducing the value of the dollar as compared to the Euro. The real interest rate in US will increase due to decrease in the supply of loanable funds caused by a movement of both foreign capital as well as domestic capital from us to Europe. The US real exchange rate will depreciate which will decrease its exports prices and increase its prices. However, US net exports will increase.
5. When the dollar gets stronger against major foreign currencies, does the price of French wine rise or fall in the United States? Would this be a good time to travel to Australia? What happens to US exports?
When dollar gets stronger, it attracts more exchange value against other currencies. The price of the French wine gets cheaper considered the appreciated of the US dollar. This is a very good time to visit since, the home country currency is stronger, would be able to get things at cheaper rate in the holiday.
Since the value of currency appreciated, more value has to be paid by other nations to purchase US products. However, exports would
decline.