Define net exports and net capital outflow. Explain how they are related.
Answer to relevant QuestionsDefine nominal exchange rate and real exchange rate, and explain how they are related. If the nominal exchange rate goes from 100 to 120 yen per dollar, has the dollar appreciated or depreciated?Describe the economic logic behind the theory of purchasing-power parity.Would each of the following groups be happy or unhappy if the U.S. dollar appreciated? Explain.a. Dutch pension funds holding U.S. government bondsb. U.S. manufacturing industriesc. Australian tourists planning a trip to the ...Suppose that Americans decided to spend a smaller fraction of their incomes. What would be the effect on saving, investment, interest rates, the real exchange rate, and the trade balance?Suppose the French suddenly develop a strong taste for California wines. Answer the following questions in words and with a diagram.a. What happens to the demand for dollars in the market for foreign-currency exchange?b. ...
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