When an economy becomes attractive to global investors, sparking a capital inflow, one result is often a decrease in net exports. Why?
What will be an ideal response?
The capital inflow reflects an increase in desired investment in the economy. With no change in desired saving, and total output fixed in the short run, the increase in investment spending must either displace exports or increase spending on imports, causing net exports to fall.
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A rise in the price of a bond causes the yield of the bond to
A) rise. B) fall. C) remain unchanged. D) rise if it's a short-term bond, fall if it's a long-term bond.
If price (P) and quantity (Q) are directly related, this means that:
A. a change in Q will alter P, but a change in P will not alter Q. B. if P increases, Q will decrease. C. if P increases, Q will also increase. D. an increase in P will cause Q to change, but the direction in which Q changes cannot be predicted.