In a small open economy, goods market equilibrium occurs when desired saving minus desired investment equals net exports. Explain
What will be an ideal response?
The domestic interest rate equals the world interest rate, regardless of the quantities of saving and investment. If saving is greater than investment at this interest rate, the excess of saving is used to purchase foreign assets. Then, the money paid to acquire foreign assets returns to purchase domestic goods, increasing net exports. If saving is lower than investment, domestic assets are being sold to foreigners, a capital inflow that enables the purchase of imports, reducing net exports.
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The discount rate is
A) the interest rate paid when a bank borrows reserves from another bank. B) the interest rate paid when a commercial bank borrows reserves from the Fed. C) the reduction in the interest rate given to the bank's best customers. D) another name for the long-term interest rate. E) the interest rate the Fed pays banks for the reserves the banks keep at the Fed.
The Apple iPhone is sold in a box labeled "Made in China," but a study by economists at the Asian Development Bank found that the actual percentage of the price of the iPhone accounted for by the only work done in China, which is assembly, is
A) 4 percent. B) 12 percent. C) 25 percent. D) 65 percent.
If you are buying a bond that is newly issued by the corporation, you are buying it in the primary market.
Answer the following statement true (T) or false (F)
When a positive externality exists in a market, total surplus:
A. is decreased by deadweight loss compared to that same market without a negative externality. B. is the same as a market without a negative externality. C. is increased by deadweight gain compared to that same market without a negative externality. D. is the same but re-distributed differently than if that same market did not have a negative externality.