quanda31 - Chapter 31 1. How would each of the following...

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Practice Questions to accompany Mankiw & Taylor: Economics 1 Chapter 31 1. How would each of the following transactions affect UK NCO (net capital outflow)? Does the transaction affect direct investment or portfolio investment? a. UK bank Barclays buys shares in South African bank Absa. Answer: NCO rises. Foreign portfolio investment. b. UK firm JCB buys steel from a Japanese manufacturer to use in the production of its diggers, excavators and trucks. Answer: UK NX falls and a Japanese manufacturer is holding UK pounds, so NCO falls. Foreign portfolio investment. c. French car manufacturer Peugeot expands its plant in Coventry in England. Answer: NCO falls. Foreign direct investment. d. An American investment fund buys shares in UK aerospace and defence firm BAE Systems. Answer: NCO falls. Foreign portfolio investment. e. UK oil company BP builds a plant in Venezuela. Answer: NCO rises. Foreign direct investment. 2. Suppose a resident of Portugal buys a set of golf clubs from a UK manufacturer using euros. a. If the UK manufacturer holds on to the euros, does UK NX = NCO in this case? Explain. Answer:
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This note was uploaded on 07/06/2009 for the course BUS BAM303 taught by Professor Na during the Spring '09 term at 東京大学.

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quanda31 - Chapter 31 1. How would each of the following...

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