1. State one benefit of international trade NOT related to price.
2. A country exports $5000 and imports $4200. Calculate net exports. Is the country running a trade surplus or a trade deficit?
3. If a country runs a trade deficit, will the level of investment spending be greater than, less than, or equal to the level of domestic saving?
4. Currently, the nominal exchange rate is approximately 0.77 British pounds per dollar (or: about 1.30 dollars per pound) If the dollar appreciates against the pound, will a dollar buy more than or less than 0.77 pounds? Will a pound buy more or less than $1.30?
5. If the nominal exchange rate increases, what will happen to the real exchange rate, ceteris paribus? Will it increase, decrease, or remain the same?
6. If a currency appreciates, what do we expect to happen to net exports, ceteris paribus? Explain.
1. State one benefit of international trade NOT related to price.
2. A country exports $5000 and imports $4200. Calculate net exports. Is the country running a trade surplus or a trade deficit?
3. If a country runs a trade deficit, will the level of investment spending be greater than, less than, or equal to the level of domestic saving?
4. Currently, the nominal exchange rate is approximately 0.77 British pounds per dollar (or: about 1.30 dollars per pound) If the dollar appreciates against the pound, will a dollar buy more than or less than 0.77 pounds? Will a pound buy more or less than $1.30?
5. If the nominal exchange rate increases, what will happen to the real exchange rate, ceteris paribus? Will it increase, decrease, or remain the same?
6. If a currency appreciates, what do we expect to happen to net exports, ceteris paribus? Explain.