Suppose that at the beginning of 2019, American holding of foreign assets consists of 100 shares of European corporate stock, with each share having a value of 1 euro. Moreover, suppose that the rest of the world holds $400 of U.S. government bonds. Finally, the exchange rate at the beginning of the year is $1.5 per euro. 

What was the American net international investment position at the beginning of 2019? 

Suppose that half of U.S. foreign assets are denominated in euros, while all of American liabilities to foreigners are denominated in dollars. Suppose that at the beginning of the year, U.S. foreign assets were valued at 100% of U.S. GDP, while American liabilities to foreigners were valued at 150% of GDP. 

How much and in what direction would a 10% depreciation of the dollar relative to the euro affect the U.S. net international investment position?

Answer rating: 100% (QA)

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