When net capital flows are positive,
A) net foreign investment is negative.
B) capital inflows are greater than capital outflows.
C) capital outflows are greater than capital inflows.
D) A and B are both correct.
D
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Imagine that Wingate National is a new bank, and that the legal reserve requirement is 10 percent. If it accepts a $1,000 cash deposit and immediately makes a $100 loan, its demand deposits, before any checks on its accounts are actually written, are
a. $1,000 b. $1,100 c. $900 d. $990 e. $110
Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and reserve-related (central bank) transactions in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises, and reserve-related (central bank) transactions become more positive (or less negative). b. The real risk-free interest rate rises, and reserve-related (central bank) transactions become more negative (or less positive). c. The real risk-free interest rate rises, and reserve-related (central bank) transactions remain the same. d. There is not enough information to determine what happens to these two macroeconomic variables. e. The real risk-free interest rate falls, and reserve-related (central bank) transactions become more negative (or less positive).