Contact Us
Sign In / Sign Up for FREE
Go to advanced search...

6 - Assignment Example

Comments (0) Cite this document
Countries spend these foreign currencies by importing goods and services or purchasing assets abroad. In an open economy, the proportion of country’s foreign currency earned and spent for purchasing…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER97.1% of users find it useful
Assignment 6
Read TextPreview

Extract of sample "6"

1. Define net exports and net capital outflow. Explain how and why they are related. Net exports (NX) is the country’s exports value minus imports value, which is given by the equation below;
Net capital out flow (NCO) is the value of foreign assets bought by domestic investors minus the value of country’s assets bought by foreign investors, which can be given as below;
Countries earn foreign currencies by exporting goods and services abroad. Countries spend these foreign currencies by importing goods and services or purchasing assets abroad. In an open economy, the proportion of country’s foreign currency earned and spent for purchasing goods and services does not impact the net exports value. If country’s net exports value is greater than zero, domestic investors are buying assets in abroad, increasing NCO. If country’s net exports value is less than zero, foreign investors are buying assets in domestic country, decreasing NCO. These transactions may involve multiple investors and banks.
2. Explain the relationship among saving, investment, and net capital outflow.
The relationship between saving (S), investment (I), and net exports (NX) can be given as below where Y is the country’s GDP.
Country’s savings mean the value of GDP minus the value of domestic consumption and government expenditures. Thus, the relationship can be obtained as below.
By equations (1) and (2);
In a closed economy, the value of domestic investments is given by the value of national savings. In an open economy, the value of domestic investments is the summation of national savings and NCO.
3. If a Japanese car costs 500,000 yen, a similar American car costs $ 10,000, and a dollar can buy 100 yen, what are the nominal and real exchange rates?

Nominal exchange rate = (100yen/dollar)
Real exchange rate = (100yen/$ ×10 000$÷500000yen)
Real exchange rate = 2 Japanese cars per one American car
4. Describe the economic logic behind the theory of purchasing- power parity.
Purchasing power parity states that a unit of any given currency should be able to buy the same amount of goods in all countries. The monetary policies practiced in countries are different. Therefore, different inflation rates are experienced by the countries. Price levels reflect the country’s rate of inflation. In case if the amount of goods that can be bought by spending a unit of dollar in country A is higher than the amount that can be bought in country B, selling such goods from country A to B is profitable. Ideally, arbitrage process occurs until the purchasing power of the currency is equal in both countries.

5. If the Fed started printing large quantities of U. S. dollars, what would happen to the number of Japanese yen a dollar could buy? Why?
Quantity or quality of the goods and services produced by the country is not changed. Only the amount of money circulating in the economy is increased. The real value of a dollar is now low while the amount of goods and services it can buy is now less. Similarly, the units of yen a dollar can buy in market for foreign currency exchange are also decreased.
1. Describe supply and demand in the market for loanable funds and the market for foreign-currency exchange. How are these markets linked?
Supply of market for loanable funds is generated from domestic savings while demand is generated from domestic investments and net capital out flaw. The cost of borrowing from market for loanable funds is denoted by real interest rate (i). Market for loanable funds can be graphically illustrated as below.

Supply of market for foreign-currency exchange is generated from net capital out flaw while the demand is generated from net exports. NCO is determined by real interest rate. The cost of purchasing foreign currencies is denoted by real exchange rate (r) as illustrated bellow.
Therefore, the link between two markets can be graphically illustrated as bellow.

2. Why are budget deficits and trade deficits sometimes called the twin deficits?
These are called twin deficits because the first can trigger the latter. As the government draws money from national savings to fund its expenditures, the cost of borrowing by public is increasing. Therefore, investing in domestic businesses becomes more profitable. Capital is now flowing into the country while decreasing the NCO. Low capital out flow also decreases the supply to market of foreign currency exchange. When there is less supply in market for foreign currency exchange, the dollar is appreciating. Therefore, the domestically produced goods and services become more expensive abroad and at local markets. Hence, more goods and services are imported to the country. Thus, it creates a trade deficit.
3. Suppose that a textile workers’ union encourages people to buy only American- made clothes. What would this policy do to the trade balance and the real exchange rate? What is the impact on the textile industry? What is the impact on the auto industry?
The demand for garments reduces in country’s exports market. This improves country’s trade balance by increasing NX. Increased NX value increases the real exchange rate in market for foreign currency exchange while appreciating US dollar. Consequently, locally produced garments become more expensive in exports market. Therefore, NX value decreases again. This offset the impact of shifting demand for local garments. However, increased price of textiles changes the producers’ and consumers welfare. This policy does not have a direct impact on auto industry. However, the increased real exchange rate results in locally produced auto become more expensive. Therefore, importing of auto from abroad is increasing.
4. What is capital flight? When a country experiences capital flight, what is the effect on its interest rate and exchange rate?
Capital flight is a large and sudden reduction in the demand for assets located in a country. When a large amount of capital is flowing out of the country, supply to the market of foreign currency exchange is increased. Therefore, the units of domestic currency which can be bought from a unit of foreign currency are increasing. Depreciating of domestic currency results in improving NX because local produce is now cheap, as compared to the world market prices. This can be graphically illustrated as bellow. Read More
Cite this document
  • APA
  • MLA
(“Assignment 6 Example | Topics and Well Written Essays - 500 words - 3”, n.d.)
Assignment 6 Example | Topics and Well Written Essays - 500 words - 3. Retrieved from
(Assignment 6 Example | Topics and Well Written Essays - 500 Words - 3)
Assignment 6 Example | Topics and Well Written Essays - 500 Words - 3.
“Assignment 6 Example | Topics and Well Written Essays - 500 Words - 3”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document


Questions for Consideration (4-6)

... Finance and Accounting The appearance of the proxy ment that accompanies the annual reports to shareholders as a separate booklet would not discourage investors from reading it. This is because the booklet contains crucial information about the pay and perks of an organization’s top executives, directors and outside accountants. Serious investors would always want to determine whether the company directors and top management of the companies they have invested in are financially accountable and reliable in case of changes in the market. Some of the companies invested in deal with huge amounts of assets (Palmiter 174). Therefore, the proxy statement would provide information on the salaries, bonuses and other compensations... Finance and...
1 Pages(250 words)Assignment

Solve problems and show work in problems. #6

.... Frequent checks of the unfilled orders follow a Poisson distribution with a mean of two orders. Has New Process, Inc. lived up to its internal goal? Cite evidence. Mean, λ = 2 orders per day The probability of x success is given by Below table summarizes the calculation for Poisson distribution. x P(x) 0 0.1353 1 0.2707 2 0.2707 3 0.1804 4 0.0902 5 0.0361 6 0.0120 7 0.0034 8 0.0009 The probability of less than five unfilled orders on hand is P(x < 5) = P(0) + P(1) + P(2) + P(3) + P(4) = 0.1353 + 0.2707 + 0.2707 + 0.1804 + 0.0902 = 0.9473 (< 0.95) No, New Process, Inc. has not lived up to its internal goal. This is because there is a chance of 94.73% of the working days of having fewer than five unfilled orders on...
2 Pages(500 words)Assignment

Discussion 6

...TRUTH AND SPIRITUALITY Superstition is often referred to as a belief in a spiritual conception that is not scientifically proven. There however exist some levels of controversy as to whether or not the beliefs people are superstitious about are real or false. This discussion and response paper will this be treated from that perspective where superstition would be analyzed as generally being factual or false. Having defined superstition as a spiritual belief without scientific proof, it would be right to proceed by saying that there are thousands of religious practices and rituals that are superstitious because they lack scientific evidence. From this point, I would say I am superstitions about a number of things, especially those...
2 Pages(500 words)Assignment

WA # 6

... Lecturer Paper Small size businesses require being actively sensitive to the volatile trading environment which affect the whole industry. As market grows, competitors emerge into the market whereas innovation shoots up the technology thus shifting the demand. This calls for continual watch out for ways to improving results of highly quality products and services that enabled the customer appreciate the value for money s/he has parted with. In this paper the focus will be based on drink and food industry that will need to develop and distribute such in a cost reduced manner for the maximization of profit. (Frewer 43) Customer needs and requirements; for instance, the drinks and food sold should reflect the taste and preference... Lecturer...
2 Pages(500 words)Assignment

Business Law (6)

...Definition of terms Definition of terms Offer (A) Textbook definition; “ An offer is a critical and an importantinitial step in a contract formation process, it says in effect that this is it-if you agree with the terms then we have a contract.” (Mallor, et al, 2012, pp. 334) (B) According to my own words, the definition of an offer based on the book’s definition is “ The stipulation of specific regulations based on sealing an agreement on working terms or any other business in which the employee and employer mutually agrees to work in tandem given all are satisfied by the terms stipulated. (C) My own example relating to the definition given above is; If an employer wants to recruit employees and in that regard, the employer... of terms...
3 Pages(750 words)Assignment

EC390.1.1 Childrens Literature Lesson 6

...CHILDREN’S LITERATURE Children’s literature Why is it important to give children choices when working with literature? Grossman 2008 , outlines the various reasons for offering choices to children. Offering children choices he argues minimizes conflicts and maximizes learning. Literature choice gives the young reader an opportunity to select a material that fascinates him and captures his ego and as a result the natural feeling of rebellion against the teacher is caged. In addition, the children feel that they are in control of the learning process and this boosts their self esteem as they feel some sense of autonomy by making their own decision regarding the choice of literature material that suites their interest. Moreover, free...
1 Pages(250 words)Assignment


... it will occur in my lifetime. However, it is an issue that will be faced in the future and should be thought about immediately. Works Cited Cassman, Kenneth G. “Biofuel or Food?: Can Crops Feed Our Cars – and the Hungry?” Scientific American, 23 October 2008. Web. article.cfm?id=biofuels-or-food 6 March 2013. Walsh, Bryan. “Solving the Biofuels vs. Food Problem” Time, 7 January 2008. Web.,8599,1701221,00.html. 6 March 2013.... Your F. 6 March Food vs. Biofuel Crops While the population is increasing, so is the food that is used for consumption. If the population continues to grow at an exponential rate that it has been, it will be hard...
1 Pages(250 words)Assignment

Writing and Reporting News, page 363, exercise 6

...Obituary of President Barack Obama, 44th President of the United s President Barrack Obama, 53. The 44th President of United s, died whileon a state visit at the Middle East on February 19, 2013. An assassin’s bullet may have killed him but his legacy will continue to live. Born on August 4, 1961 in Honolulu Hawaii and spent his early childhood in the Menteng sub-district of central Indonesia where he acquired his tolerance for people of other race and nationality. He eventually made it to Harvard to become a lawyer and then a civil rights lawyer championing the cause of the oppressed and the marginalized. He became a Senator in 1997 and became the 44th President of the United States of America. He is known for pulling out... of President ...
1 Pages(250 words)Assignment

6 Steps to Decision-Making Process

... of $732.5 million. b) Did Zimmer have a net cash inflow or outflow? Zimmer had a cash inflow of $33.5 million 18. Who was Zimmer’s auditor? Were there any exceptions listed in the opinion? Please be specific. The auditor of Zimmer in 2006 was PricewaterhouseCoopers. The consolidated financial statements are presented fairly in all material respects. Works Cited 2014. “6 Steps to Decision-making process.” 25 March 2014. 6-steps-to-decision-making-process.html> Schermerhorn, John, and James Hunt, and Richard Osborn. Organizational Behavior (8th ed.). New York: John Wiley & Sons. 2003. Print.... group to reach a decision than an individual. 6. How is the decision-making risk affected by having or not having intelligent information? Compare and...
4 Pages(1000 words)Assignment

Week 6 DQ 1

...Sur Individual Communication Versus Group Communication Communication involves the relay of a message across two (or more) bodies in a constructive model. The various tools involved in communication apply in group communication as much as they apply to individuals engaged in the whole communiqué (Baack 11). Although the factors surrounding individual communication may be different, the concept used in the relay of the message is basically the same. There are limitations to the comparability of these two communication systems, since they basically entail different bodies in each case. The comparability of these two communication systems lies in the passage of the message and the recipients. In individual communication, the initial...
1 Pages(250 words)Assignment

Blog # 6

...Blog 6 Blog 6 Korean men are rushing to marry women outside Korea and these women, Viet se and Singapore women, in particular, also yearn to be involved with these Korean men (Chan & Xueli, 2011). In the last couple of years, there has been a rise in the fame of South Korean television dramas, movies, pop music, celebrities and fashion in East and Southeastern Asia. Korean television dramas are an important element of this cultural diffusion referred to as the ‘Korean Wave’ (Onishi, 2007). The contemporary Korean culture has made their men appear more romantic or seem to understand real love compared to men from other cultures, which explains the reason why Vietnamese and Singapore women run to them. Women love the love stories that men...
1 Pages(250 words)Assignment

HW 6

... HW 6 – Decision Making Process This decision making process was used to resolve a problem related to the human resources.The problem was that the organization needed to train the employees using the most productive and the most effective method available. The decision criteria incorporated factors such as the time required, the convenience, and the cost of the training procedure. With regard to weighing the criteria, the organization prioritized cost, then time and lastly convenience. With respect to the available alternatives, the organization had to choose from two main methods of training that include on-the -job training and off-the-job training. Off-the-job training involves employees being trained at an institution... HW 6 – Decision...
1 Pages(250 words)Assignment

Philosophy 6

... Lecturer’s Perspectivism: evidence for and against Persepectivism is defined as ideas that take consign from a particular perspective. There are many perspectives by which judgment on truth and value is made. Perspectivism is for the idea that there is no objective truth. Truth is something that is made by individuals after bringing together separate vantage points (Nietzsche and Kaufmann, 74). The evidence for perspectivism is that the human mind sees itself from its own perspective. The world can only be secured if the world can be interpreted and viewed from more than one perspective. The evidence against this idea is that the theory of knowledge relies on the reasoning power this is according to Kant and Descartes. Reality... Lecturer’s...
1 Pages(250 words)Assignment

Discussion 6

...Please write short answer for this 2 questions In America, we are bombarded by opinion polls. Such polls use the method of inductive generalizing from a sample, presuming that the answers given by a small number of respondents represent the attitudes of American voters as a whole. Do a search on the Internet for a recent opinion poll. Paste the results in your discussion response. Look at the report of the poll results and discuss how strong you believe these poll results are. Refer to such aspects of inductive generalizing as the sampling frame, how representative the poll sample was, and how biased the poll might be. Poll results can be found here: write short...
1 Pages(250 words)Assignment

Forum 6 - Chapters 11, 12

...Port Facility, Technology and Security How does port facility technology interface with homeland security? The homeland and national security rely on the facilities at the ports to keep off threats. The ports have networked computer control systems and other advanced technologies to rule out the possibilities of attacks. The ports also handle millions of tons of domestic export, and import cargo annually (GOA 2002). To effectively manage these roles, they have to use sophisticated technology to trace and track ships, as well as, the cargo. The technology systems improve the ports ability to monitor what leaves and enters the country. The effective use of technology at the ports, therefore, boosts the state of homeland security... Facility,...
1 Pages(250 words)Assignment

Week 6

...Week 6 al Affiliation) Week 6 The peer-reviewed journal article, “Moving Healthcare Quality Forward With Nursing-Sensitive Value-Based Purchasing” provides valuable information related to evidence supporting nursing value in nursing-sensitive value-based purchasing (NSVBP) (Kavanagh, Cimiotti, Abusalem, & Coty, 2012). The article recognizes the significance of nursing-sensitive measures in value-based purchasing initiative. The article proposes NSVBP as a motivation towards optimal staffing and practice environment (Kavanagh, Cimiotti, Abusalem, & Coty, 2012). Relevantly, the article analyzes the health, governmental, institutional, and general information on the need, implementation, and capability of nursing-sensitive value-based...
1 Pages(250 words)Assignment

Designing for IPhone 6

...a beautiful sleek design unlike other makes before it. The phone is endowed with a super high screen resolution which means that it has a potential of maximizing very small objects to fit a size which is easily viewable by an individual (Anthony). Iphone6 is endowed with a clever and rich ability feature that has worked towards solving one handed user problems. Moreover, the size of an iPhone and its flexibility makes it easy to carry and nearly impossible to break even in an instance where it falls or is bent over respectively.An iPhone 6 also has an inbuilt tracker device system which allows the owner to track its whereabouts in case it gets stolen or lost. Furthermore, it is water proof and owners need not worry about it falling in...
7 Pages(1750 words)Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Assignment on topic Assignment 6 for FREE!

Contact Us