Which of the following is included in a nation's capital and financial account?
I. the purchase of foreign stocks and bonds
II. the sale of foreign stocks and bonds
III. importing a piece of capital equipment
A) I only
B) I and II
C) III only
D) I, II and III
B
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Countries have trade surpluses when they export more than they import
Indicate whether the statement is true or false
Mr. and Mrs. Jones want to invest for their retirement by buying stocks. Mr. Jones has heard about an up-and-coming stock and wants to invest $10,000 in it. Mrs. Jones thinks it would be more prudent to invest $10,000 in a mutual fund because it would be _____________ and therefore ______________.
a. quicker/more profitable b. diversified/less risky c. easier to understand/have a greater return d. collectible/earn equity
Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises, and nominal value of the domestic currency falls. b. The real risk-free interest rate falls, and nominal value of the domestic currency falls. c. The real risk-free interest rate rises, and nominal value of the domestic currency remains the same. d. The real risk-free interest rate falls, and nominal value of the domestic currency rises. e. There is not enough information to determine what happens to these two macroeconomic variables.
Answer the following questions true (T) or false (F)
1. The basis for trade is comparative advantage, not absolute advantage. 2. If a country produces only two goods, it is possible to have a comparative advantage in the production of both those goods. 3. In a two-good, two country world, if one country has an absolute advantage in the production of both goods, it cannot benefit by trading with the other country.