Written Assignment 4.docx - 1 Eco 111 Written Assignment 4 By Kelley Paletko Thomas Edison State University Answer all of the following questions This

Written Assignment 4.docx - 1 Eco 111 Written Assignment 4...

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1 Eco 111 Written Assignment 4 By: Kelley Paletko Thomas Edison State University Answer all of the following questions. This assignment covers Chapters 18 through 23 in the textbook. 1. Explain the relationship among savings, investment, and net capital outflow. Saving equals domestic investment plus net capital outflow, because any dollar saved can be used to finance accumulation of domestic capital or it can be used to finance the purchase of capital abroad. Y = C + I + G + NX Y - C - G = I + NX S = I + NX NX = NCO S = I + NCO 2. Describe the economic logic behind the theory of purchasing-power parity (PPP). What factors might prevent PPP from holding true? 3. Describe supply and demand in the market for loanable funds and the market for foreign currency exchange. How are these markets linked? 4. What is capital flight? When a country experiences capital flight, what is the effect on the country's interest rate and exchange rate? 5. List and explain the three theories for why the short-run aggregate- supply curve is upward sloping.
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