Economics

Consider the following two cases. In the first, a U.S. firm purchases

Consider the following two cases. In the first, a U.S. firm purchases 18% of a foreign firm. In the second, a U.S. firm builds a new production facility in a foreign country. Both are ________, with the first referred to as ________ and the second as ________. A) foreign direct investment (FDI) outflows; greenfield; brownfield […]

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Date: September 10th, 2020

Define the official settlements balance. Is there any difference betwe

Define the official settlements balance. Is there any difference between the United States and other countries in terms of what this balance measures? How does this affect the ability of the countries to run current account deficits? What will be an ideal response?   ANSWER For most countries it measures international reserve changes. For the […]

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Date: September 10th, 2020

According to the text, which of the following factors may make the the

According to the text, which of the following factors may make the theory of purchasing power parity unrealistic? A) Purchasing power parity works only with traded goods. B) Trading countries may stop exchanging goods once prices between them equalize. C) Shipping, insurance, and transaction costs may reduce the implication of purchasing power parity. D) Prices […]

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Date: September 10th, 2020

If the dollar interest rate is 10 percent and the euro interest rate i

If the dollar interest rate is 10 percent and the euro interest rate is 6 percent, then an investor should A) invest only in dollars. B) invest only in euros. C) be indifferent between dollars and euros. D) invest only in dollars if the exchange rate is expected to remain constant. E) invest only in […]

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Date: September 10th, 2020

How can regional concentration of firms in an industry lead to externa

How can regional concentration of firms in an industry lead to external economies of scale? Give examples of these types of industrial clusters in the United States. Are they always beneficial? What will be an ideal response?   ANSWER When an industry is highly concentrated in a specific location, this leads to a decrease in […]

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Date: September 10th, 2020

How does the two-good, two-country version of the Ricardian model diff

How does the two-good, two-country version of the Ricardian model differ from the two-country, many-good model in terms of the determination which goods are produced and exported by each country? What will be an ideal response?   ANSWER In the two-good-two-country version of the Ricardian model, comparative advantage is totally determined by physical productivity ratios. […]

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Date: September 10th, 2020