Open Economy: International Trade and Finance

Money going out of a country for investment purposes.

Foreign investors purchasing domestic assets.

Domestic investors purchasing foreign assets.

Money used for only trade across borders.

It increases the supply of loanable funds.

It decreases the supply of loanable funds.

It increases the demand for loanable funds.

It decreases the demand for loanable funds.

Capital will flow out of the U.S., decreasing demand for the U.S. dollar.

Capital will flow into the U.S., increasing demand for the U.S. dollar.

Capital flows will be unaffected, and the demand for the U.S. dollar will remain constant.

Capital will flow out of the U.S. and into Europe, increasing demand for the Euro.

Higher real interest rates in the domestic country.

Lower real interest rates in the foreign country.

Lower real interest rates in the domestic country.

Increased political stability in the domestic country.

It decreases the demand for the domestic currency.

It increases the supply of the domestic currency.

It increases the demand for the domestic currency.

It has no effect on the foreign exchange market.

Lower real interest rates in the domestic country.

Higher real interest rates in the domestic country.

Political instability in foreign countries.

Decreased investment opportunities domestically.

A decrease in demand for the domestic currency.

An increase in the supply of the domestic currency.

An increase in demand for the domestic currency.

No change in the demand or supply of the domestic currency.

High real interest rates lead to outbound capital flow.

Low real interest rates have no effect on capital flow.

High real interest rates lead to inbound capital flow.

Real interest rates are not related to capital flows.

A rightward shift in the demand curve for the currency, leading to appreciation.

A leftward shift in the demand curve for the currency, leading to depreciation.

A rightward shift in the supply curve for the currency, leading to appreciation.

A leftward shift in the supply curve for the currency, leading to depreciation.

Capital will flow from Japan to the United Kingdom, appreciating the British pound.

Capital will flow from the United Kingdom to Japan, appreciating the Japanese yen.

The Japanese yen will depreciate due to decreased demand.

There will be no significant capital flow between the two countries.