Author Question: All of these events will cause an increase (shift to the right) in the demand for U.S. dollar real ... (Read 59 times)

tfester · **on:** Jun 30, 2018

All of these events will cause an increase (shift to the right) in the demand for U.S. dollar real loanable funds EXCEPT:
a. A decrease in the U.S. real risk-free interest rate.
b. An increase in U.S. business investments.
c. An increase in U.S. government budget deficits.
d. An increase in foreign direct investments (e.g., building Greenfield plants) in the United States.
e. All the above increase the demand of real loanable funds.

Question 2

Assume the government reduces government spending. What is the first round effect on the components of the balance of payments (assume low international capital mobility and fixed exchange rates; also assume that before the government action all the components were 0)?
a. Current international transactions balance and reserves account become positive; net nonreserve international borrowing/lending balance becomes negative.
b. Current international transactions balance becomes positive; net nonreserve international borrowing/lending balance and reserves account become negative.
c. Net nonreserve international borrowing/lending balance becomes positive; current international transactions balance and reserves account becomes negative.
d. Net nonreserve international borrowing/lending balance and reserves account become positive; current international transactions balance becomes negative.
e. Reserves account becomes positive; current international transactions balance and net nonreserve international borrowing/lending balance become negative.