Question 1

Net capital outflow equals the purchase of
A)foreign assets by domestic residents.
B)domestic assets by foreign residents.
C)domestic assets by foreign residents - the purchase of foreign assets by domestic residents
D)foreign assets by domestic residents - the purchase of domestic assets by foreign residents

Accepted Answer

Net capital outflow is calculated as the difference between the purchase of foreign assets by domestic residents and the purchase of domestic assets by foreign residents. Therefore, option D - foreign assets by domestic residents minus the purchase of domestic assets by foreign residents - is the correct answer.

Question 2

The purchase of U.S. government bonds by Egyptians is an example of
A)U.S. imports.
B)U.S. exports.
C)foreign portfolio investment by Egyptians.
D)foreign direct investment by Egyptians.

Accepted Answer

The purchase of U.S. government bonds by Egyptians is an example of foreign portfolio investment, as it involves the acquisition of financial assets rather than physical products or ownership in a company.

Question 3

Net capital outflow measures the imbalance between the amount of
A)foreign assets held by domestic residents and domestic assets held by foreign residents.
B)foreign assets bought by domestic residents and the amount of domestic assets bought by foreigners.
C)foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners.
D)None of the above is correct.

Accepted Answer

Net capital outflow measures the difference between the amount of foreign assets bought by domestic residents and the amount of domestic assets bought by foreigners. This can be expressed as the equation: Net Capital Outflow = Domestic Investment - Domestic Saving, which highlights the relationship between domestic savings and investment and the flow of capital into and out of a country. Option A is incorrect as it includes foreign assets held by domestic residents, which is not directly related to net capital outflow. Option C is incorrect as it measures the balance of trade between a country and its trading partners, not the flow of investment capital. Option D is incorrect as one of the options is correct.

Question 4

Net capital outflow equals the difference between a country's
A)income and expenditure.
B)investment and saving.
C)purchases of foreign goods and services and sales of goods and services abroad.
D)purchases of foreign assets and sales of domestic assets abroad.

Accepted Answer

Net capital outflow measures the difference between the amount of money that is flowing from a country to another through the purchase of foreign assets and the amount of money flowing from another country to the domestic one through the sale of its assets. Therefore, option D is the most appropriate answer. Options A and B do not accurately describe the concept of net capital outflow. Option C describes international trade rather than capital flow.

Question 5

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations. Other things the same, these actions
A)raise both U.S. net exports and U.S. net capital outflows.
B)raise U.S. net exports and lower U.S. net capital outflows.
C)lower both U.S. net exports and U.S. net capital outflows.
D)lower U.S. net exports and raise U.S. net capital outflows.

Accepted Answer

The answer of Suppose that foreign citizens decide to purchase...

Question 6

Jen and Alica are both U.S. citizens. Jen opens a cafe in France. Alicia buys equipment from a company in Canada to use in her factory. Whose action is an example of U.S. foreign direct investment?
A)Jen's and Alica's
B)Jen's but not Alicia's
C)Alicia's but not Jen's
D)Neither Anthony's nor Tom's.

Accepted Answer

Jen's action of opening a cafe in France is an example of U.S. foreign direct investment because she is directly investing in a foreign country. Alicia's action of buying equipment from a company in Canada is not foreign direct investment because she is not directly investing in a foreign country, but rather purchasing goods from a foreign company to use domestically.

Question 7

Net capital outflow is defined as the purchase of
A)foreign assets by domestic residents minus the purchase of domestic assets by foreign residents.
B)foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents.
C)domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents.
D)domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Accepted Answer

Net capital outflow refers to the net flow of domestic funds to foreign assets. It is the difference between the purchases of foreign assets by domestic residents and the purchases of domestic assets by foreign residents. Therefore, option A is the correct choice.

Question 8

Which of the following is an example of U.S. foreign direct investment?
A)A U.S. based mutual fund buys stock in Eastern European companies.
B)A U.S. citizen builds and operates a coffee shop in the Netherlands.
C)A Swiss bank buys a U.S. government bond.
D)A German tractor factory opens a plant in Waterloo, Iowa.

Accepted Answer

The answer of Which of the following is an example...

Question 9

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets, then France's net capital outflow is
A)-.3 trillion euros, so it must have a trade deficit.
B)-.3 trillion euros, so it must have a trade surplus.
C).3 trillion euros, so it must have a trade deficit.
D).3 trillion euros, so it must have a trade surplus.

Accepted Answer

The answer of If domestic residents of France purchase 1.2...

Question 10

Net capital outflow equals
A)the value of domestic assets purchased by foreigners.
B)the value of foreign assets purchased by domestic residents.
C)the value of domestic assets purchased by foreigners - the value of foreign assets purchased by domestic residents.
D)the value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners.

Accepted Answer

Net capital outflow is the difference between the amount of domestic assets purchased by foreigners and the amount of foreign assets purchased by domestic residents. Thus, the correct option is D, which subtracts the value of domestic assets purchased by foreigners from the value of foreign assets purchased by domestic residents.

Question 11

If U.S. residents purchase $600 billion worth of foreign assets and foreigners purchase $300 billion worth of U.S. assets,
A)U.S. net capital outflow is $300 billion; capital is flowing into the U.S.
B)U.S. net capital outflow is $300 billion; capital is flowing out of the U.S.
C)U.S. net capital outflow is -$300 billion; capital is flowing into the U.S.
D)U.S. net capital outflow is -$300 billion; capital is flowing out of the U.S.

Accepted Answer

The answer of If U.S. residents purchase $600 billion worth...

Question 12

If domestic residents of other countries purchase $600 billion of U.S. assets and U.S residents purchase $500 billion of foreign assets, then U.S. net capital outflow is
A)$100 billion and the U.S. has a trade surplus.
B)$100 billion and the U.S has a trade deficit.
C)-$100 billion and the U.S. has a trade surplus.
D)-$100 billion and the U.S. has a trade deficit.

Accepted Answer

Net capital outflow equals the difference between US residents’ purchase of foreign assets ($500 billion) and domestic residents of other countries purchase of US assets ($600 billion), which is -$100 billion. This means that the US has a net outflow of capital and a trade deficit.

Question 13

Suppose that more British decide to vacation in the U.S. and that the British purchase more U.S. Treasury bonds. Ignoring how payments are made for these purchases,
A)the first action by itself raises U.S. net exports, the second action by itself raises U.S. net capital outflow.
B)the first action by itself raises U.S. net exports, the second action by itself lowers U.S. net capital outflow.
C)the first action by itself lowers U.S. net exports, the second action by itself raises U.S. net capital outflow.
D)the first action by itself lowers U.S. net exports, the second action by itself lowers U.S. net capital outflow.

Accepted Answer

The first action (more British deciding to vacation in the U.S.) increases U.S. net exports as there will be an increase in demand for U.S. goods and services by British tourists.

The second action (British purchasing more U.S. Treasury bonds) increases U.S. net capital outflow as there will be an inflow of funds into the U.S. financial market.

Therefore, the correct choice is B, as the first action raises U.S. net exports while the second action lowers U.S. net capital outflow, and these two actions counteract each other.

Question 14

Which of the following is an example of U.S. foreign portfolio investment?
A)A U.S. legal office opens a branch office in Holland.
B)Erica, a U.S. resident, buys bonds issued by the Swiss government.
C)Both A and B are examples of U.S. portfolio investment.
D)Neither A nor B are examples of U.S. portfolio investment.

Accepted Answer

U.S. foreign portfolio investment refers to U.S. individuals or entities investing in foreign financial assets such as stocks, bonds, or other securities. Option B is an example of this as Erica, a U.S. resident, is investing in bonds issued by the Swiss government. Option A is an example of foreign direct investment, which involves a U.S. entity opening a branch office in a foreign country.

Question 15

Which of the following is an example of U.S. foreign direct investment?
A)A Greek company opens a cheese factory in the U.S.
B)A German mutual fund buys stock issued by a U.S. corporation.
C)A U.S. beverage company opens a bottling plant in Russia.
D)A U.S. bank buys bonds issued by an Argentinean company.

Accepted Answer

A U.S. beverage company opening a bottling plant in Russia is an example of U.S. foreign direct investment, as it involves a U.S. company investing directly in a foreign country by establishing operations there. The other options involve either foreign companies investing in the U.S. (Option A) or U.S. companies investing abroad through financial instruments like stocks and bonds (Options B and D), which are not considered foreign direct investment.

Question 16

Which of the following is an example of U.S. foreign direct investment?
A)A Swedish car manufacturer opens a plant in Tennessee.
B)A Dutch citizen buys shares of stock in a U.S. company.
C)A U.S. based restaurant chain opens new restaurants in India.
D)A U.S. citizen buys stock in companies located in Japan.

Accepted Answer

The answer of Which of the following is an example...

Question 17

Which of the following is an example of U.S. foreign portfolio investment?
A)Albert, a German citizen, buys stock in a U.S. computer company.
B)Larry, a citizen of Ireland, opens a fish and chips restaurant in the United States.
C)Nancy, a U.S. citizen, buys bonds issued by a Japanese bank.
D)Dustin, a U.S. citizen, opens a country-western tavern in New Zealand.

Accepted Answer

Foreign portfolio investment refers to the purchase of stocks, bonds, and other financial assets by investors in one country in financial markets outside of their home country. Choice C represents a U.S. citizen purchasing bonds issued by a foreign bank, which is an example of foreign portfolio investment. Choices A, B, and D represent foreign direct investment, which involves the acquisition of controlling ownership in foreign assets such as businesses, real estate, and natural resources.

Question 18

Net exports measures the difference between a country's
A)income and expenditures.
B)sale of goods and services abroad and purchase of foreign goods and services.
C)sale of domestic assets abroad and purchase of foreign assets.
D)All of the above are correct.

Accepted Answer

Net exports measures the difference between a country's sale of goods and services abroad and purchase of foreign goods and services. The other options are incorrect definitions of different economic concepts.

Question 19

Which of the following is an example of U.S. foreign direct investment?
A)A Chinese company opens a restaurant in the U.S.
B)An Australian bank buys stocks issued by a U.S. corporation.
C)A U.S. bank buys bonds issued by an Australian corporation.
D)A U.S. company opens an auto parts factory in Canada.

Accepted Answer

Foreign direct investment refers to when a company invests in and establishes operations in a foreign country. A U.S. company opening an auto parts factory in Canada fits this definition. Options A, B, and C all involve foreign investment in the U.S., rather than vice versa.

Question 20

Which of the following is an example of U.S. foreign portfolio investment?
A)Disney builds a new amusement park near Barcelona, Spain.
B)A U.S. citizen buys bonds issued by the British government.
C)A Dutch hotel chain opens a new hotel in the United States.
D)A citizen of Singapore buys a bond issued by a U.S. corporation.

Accepted Answer

Foreign portfolio investment refers to investments in foreign financial assets such as stocks, bonds, and other tradable securities. Option B describes a U.S. citizen investing in British government bonds, which qualifies as a U.S. foreign portfolio investment. Options A, C, and D describe foreign direct investment activities, which involve owning or controlling a physical asset, such as building an amusement park, opening a hotel or buying a bond issued by a U.S. corporation, respectively.

Quiz 31: Open-Economy Macroeconomics: Basic Concepts

Net capital outflow equals the purchase of

The purchase of U.S. government bonds by Egyptians is an example of

Net capital outflow measures the imbalance between the amount of

Net capital outflow equals the difference between a country's

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations. Other things the same, these actions

Jen and Alica are both U.S. citizens. Jen opens a cafe in France. Alicia buys equipment from a company in Canada to use in her factory. Whose action is an example of U.S. foreign direct investment?

Net capital outflow is defined as the purchase of

Which of the following is an example of U.S. foreign direct investment?

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets, then France's net capital outflow is

Net capital outflow equals

If U.S. residents purchase $600 billion worth of foreign assets and foreigners purchase $300 billion worth of U.S. assets,

If domestic residents of other countries purchase $600 billion of U.S. assets and U.S residents purchase $500 billion of foreign assets, then U.S. net capital outflow is

Suppose that more British decide to vacation in the U.S. and that the British purchase more U.S. Treasury bonds. Ignoring how payments are made for these purchases,

Which of the following is an example of U.S. foreign portfolio investment?

Which of the following is an example of U.S. foreign direct investment?

Which of the following is an example of U.S. foreign direct investment?

Which of the following is an example of U.S. foreign portfolio investment?

Net exports measures the difference between a country's

Which of the following is an example of U.S. foreign direct investment?

Which of the following is an example of U.S. foreign portfolio investment?