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CC2105+(T9[1].Ch.18)+Q_A - CC2105Ch. 1 a...

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CC2105 Ch.18 Problems and Applications 1. a. When an American art professor spends the summer touring museums in  Europe, he spends money buying foreign goods and services, so U.S. exports  are unchanged, imports increase, and net exports decrease. b. When students in Paris flock to see the latest Arnold Schwarzenegger movie,  foreigners are buying a U.S. good, so U.S. exports rise, imports are unchanged,  and net exports increase. c. When your uncle buys a new Volvo, an American is buying a foreign good, so  U.S. exports are unchanged, imports rise, and net exports decline. d. When the student bookstore at Oxford University sells a pair of Levi's 501 jeans,  foreigners are buying U.S. goods, so U.S. exports increase, imports are  unchanged, and net exports increase. e. When a Canadian shops in northern Vermont to avoid Canadian sales taxes, a  foreigner is buying U.S. goods, so U.S. exports increase, imports are unchanged,  and net exports increase. 2. a. Wheat is traded more internationally than in the past because shipping costs  have declined, as have trade restrictions. b. Banking services are traded more internationally than in the past because  communications costs have declined, as have trade restrictions. c. Computer software is traded more internationally than in the past because the  computer industry has grown and the software is easier to transport (since it can  now be downloaded electronically). d. Automobiles are traded more internationally than in the past because  transportation costs have declined, as have tariffs and quotas. 3. Foreign direct investment requires actively managing an investment, for example, by  opening a retail store in a foreign country.  Foreign portfolio investment is passive, for  example, buying corporate stock in a retail chain in a foreign country.  As a result, a  corporation is more likely to engage in foreign direct investment, while an individual  investor is more likely to engage in foreign portfolio investment.
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