Question 1

Use the following to answer questions:
Suppose that the interest rate in Canada is 4%,in Japan it is 7%,and financial assets in the two countries are equal in risk.
-(Scenario: Japan and Canada)Refer to Scenario: Japan and Canada.As a result:

Accepted Answer

With a higher interest rate in Japan, investors will want to invest their money there to earn a higher return. This will cause a capital flow from Canada to Japan as investors sell their Canadian assets and buy Japanese ones.

Question 2

If asset owners in Japan and Canada consider Japanese and Canadian assets as good substitutes for each other and if the Canadian interest rate is 5%,while the Japanese interest rate is 2%:

Accepted Answer

If Japanese and Canadian assets are considered good substitutes, investors will move their funds to Canada to take advantage of the higher interest rate, increasing the supply of funds in Canada and reducing the Canadian interest rate.

Question 3

Use the following to answer questions: 
-(Figure: International Capital Flows)Refer to Figure: International Capital Flows.At an interest rate of 4%,the excess of loanable funds supplied by _____ lenders will be exported to _____ borrowers.

Accepted Answer

At an interest rate of 4%, the loanable funds supplied by British lenders exceed the demand for loanable funds in Britain. Hence, the excess funds will be exported to other countries with a higher demand for loanable funds, such as Canada. Therefore, British lenders will be exporting funds to Canadian borrowers.

Question 4

Interest rates between two countries tend to converge if:

Accepted Answer

When the residents of the two countries believe that a foreign asset is as good as a domestic one, they will be willing to invest in foreign assets, leading to an increase in demand for foreign currency and a decrease in demand for domestic currency. This will result in a decrease in domestic interest rates and an increase in foreign interest rates, causing interest rates between the two countries to converge.

Question 5

Use the following to answer questions: 
-In the absence of international capital flows,the equilibrium interest rate in the Canadian market for loanable funds is 3%,while in Germany,it is 7%.International borrowing and lending between Canada and Germany could result in a common interest rate of _____% and _____.

Accepted Answer

The answer of Use the following to answer questions: 
-In...

Question 6

Use the following to answer questions: 
-(Figure: The Loanable Funds Model in the Canadian Market)Refer to Figure: The Loanable Funds Model in the Canadian Market.If the actual interest rate is higher than 4% in the Canadian market,then the quantity of loanable funds supplied will be _____ the quantity of loanable funds demanded.

Accepted Answer

When the interest rate is higher than the equilibrium rate (4% in this case), the quantity of loanable funds supplied will exceed the quantity demanded, leading to a surplus.

Question 7

Use the following to answer questions: 
-(Figure: International Capital Flows)Refer to Figure: International Capital Flows.At an interest rate of 4%,the shortage of loanable funds available to _____ borrowers will be satisfied by _____ lenders.

Accepted Answer

The answer of Use the following to answer questions: 
-(Figure:...

Question 8

If asset owners in Japan and Canada consider Japanese and Canadian assets as good substitutes for each other and if the Canadian interest rate is 5% and the Japanese interest rate is 2%,what will NOT occur?

Accepted Answer

Loanable funds will flow from Japan to Canada to take advantage of the higher Canadian interest rate, not the other way around.

Question 9

Use the following to answer questions: 
-(Figure: The Loanable Funds Model in the Canadian Market)Refer to Figure: The Loanable Funds Model in the Canadian Market.If the actual interest rate is less than 4% in the Canadian market,then the quantity of loanable funds supplied will be _____ the quantity of loanable funds demanded.

Accepted Answer

If the actual interest rate is less than 4%, this means that the interest rate is below the equilibrium level. At this below-equilibrium interest rate, the quantity of loanable funds supplied (i.e. saving) will be less than the quantity of loanable funds demanded (i.e. investment). Therefore, there will be a shortage of loanable funds, and borrowers (demanders of loanable funds) will compete to get the available funds, driving up the interest rate towards the equilibrium level.

Question 10

Use the following to answer questions: 
-(Figure: International Capital Flows)Refer to Figure: International Capital Flows.At an interest rate of 4%,the quantity of loanable funds demanded by British borrowers is _____ the quantity of loanable funds supplied by British lenders.

Accepted Answer

At an interest rate of 4%, the quantity of loanable funds supplied by British lenders is greater than the quantity of loanable funds demanded by British borrowers. This can be seen by the intersection of the supply and demand curves at point A, where the quantity supplied is greater than the quantity demanded.

Question 11

Use the following to answer questions:
Suppose that the interest rate in Canada is 4%,in Japan it is 7%,and financial assets in the two countries are equal in risk.
-(Scenario: Japan and Canada)Refer to Scenario: Japan and Canada.The implication is that:

Accepted Answer

When interest rates are unequal between two countries with equal risk, investors will transfer their money to the country with the higher interest rate, creating a capital flow. This will continue until the interest rates become equal in both countries. Therefore, option C is the correct implication.

Question 12

Use the following to answer questions: 
-(Figure: The Loanable Funds Model in the Canadian Market)Refer to Figure: The Loanable Funds Model in the Canadian Market.Assume that each country's (Canada and Britain)equilibrium interest rate is 4%.To reconcile the apparent disequilibrium in both markets,assuming that assets and liabilities are viewed as homogeneous,capital _____ will _____ interest rates.

Accepted Answer

The answer of Use the following to answer questions: 
-(Figure:...

Question 13

Use the following to answer questions: 
-(Figure: International Capital Flows)Refer to Figure: International Capital Flows.At an interest rate of 4%,the total quantity of loanable funds demanded across the two markets is _____ the total quantity of loanable funds supplied by lenders.

Accepted Answer

At an interest rate of 4%, the demand and supply of loanable funds are equal at $400 billion. Therefore, the total quantity of loanable funds demanded across the two markets is equal to the total quantity of loanable funds supplied by lenders.

Question 14

Use the following to answer questions:
Suppose that the interest rate in Canada is 4%,in Japan it is 7%,and financial assets in the two countries are equal in risk.
-Direct foreign investment means the purchase of:

Accepted Answer

Direct foreign investment refers to the purchase of factories or other physical assets in a foreign country. It is not related to purchasing stocks, bonds, or bank loans in a foreign country. In this scenario, the equal risk of financial assets in Canada and Japan implies that investing in factories in either country would have similar levels of risk. Moreover, the higher interest rate in Japan may make it more appealing for a direct foreign investment opportunity.

Question 15

When interest rates are higher in country A than in other countries:

Accepted Answer

When interest rates are higher in country A than in other countries, investors from other countries will be incentivized to invest their capital in country A, as they can earn a higher return on their investments. This will result in capital flowing into country A.

Question 16

Use the following to answer questions: 
-(Figure: International Capital Flows)Refer to Figure: International Capital Flows.At an interest rate of 4%,the quantity of loanable funds supplied by Canadian lenders is _____ the quantity of loanable funds demanded by Canadian borrowers.

Accepted Answer

At an interest rate of 4%, the quantity of loanable funds supplied by Canadian lenders is less than the quantity of loanable funds demanded by Canadian borrowers. This is indicated by the intersection of the demand and supply curves at a point to the right of the vertical axis, which represents a shortage of loanable funds.

Question 17

Use the following to answer questions: 
-(Figure: The Loanable Funds Model in the Canadian Market)Refer to Figure: The Loanable Funds Model in the Canadian Market.If the actual interest rate is equal to 4% in the Canadian market,then the quantity of loanable funds supplied will be _____ the quantity of loanable funds demanded.

Accepted Answer

At an interest rate of 4%, the quantity of loanable funds supplied is equal to the quantity of loanable funds demanded, indicated by the intersection of the supply and demand curves.

Question 18

In countries with rapidly growing economies,like China and India,the demand for loanable funds is _____ and interest rates are _____ than in countries with slowly growing economies.

Accepted Answer

As the economy grows, there is a greater demand for investment and entrepreneurship, leading to an increased demand for loanable funds. This increase in demand for loanable funds leads to a rise in interest rates as lenders seek to maximize their returns on their available funds. Therefore, countries with rapidly growing economies have a larger demand for loanable funds and higher interest rates compared to countries with slowly growing economies.

Question 19

Use the following to answer questions: 
-(Figure: International Capital Flows)Refer to Figure: International Capital Flows.At an interest rate of 4%,the quantity of loanable funds supplied by British lenders is _____ the quantity of loanable funds demanded by British borrowers.

Accepted Answer

At an interest rate of 4%, if the supply of loanable funds by British lenders is to the right of the demand for loanable funds by British borrowers on the graph, it means that the quantity supplied is greater than the quantity demanded.

Question 20

Use the following to answer questions: 
-(Figure: International Capital Flows)Refer to Figure: International Capital Flows.At an interest rate of 4%,the quantity of loanable funds demanded by Canadian borrowers is _____ the quantity of loanable funds supplied by Canadian lenders.

Accepted Answer

At an interest rate of 4%, the demand for loanable funds by Canadian borrowers exceeds the supply provided by Canadian lenders, indicating that the quantity demanded is greater than the quantity supplied.

Quiz 18: International Macroeconomics

Use the following to answer questions: Suppose that the interest rate in Canada is 4%,in Japan it is 7%,and financial assets in the two countries are equal in risk. -(Scenario: Japan and Canada) Refer to Scenario: Japan and Canada.As a result:

If asset owners in Japan and Canada consider Japanese and Canadian assets as good substitutes for each other and if the Canadian interest rate is 5%,while the Japanese interest rate is 2%:

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows.At an interest rate of 4%,the excess of loanable funds supplied by _ lenders will be exported to _ borrowers.

Interest rates between two countries tend to converge if:

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows.At an interest rate of 4%,the shortage of loanable funds available to _ borrowers will be satisfied by _ lenders.

If asset owners in Japan and Canada consider Japanese and Canadian assets as good substitutes for each other and if the Canadian interest rate is 5% and the Japanese interest rate is 2%,what will NOT occur?

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows.At an interest rate of 4%,the quantity of loanable funds demanded by British borrowers is _____ the quantity of loanable funds supplied by British lenders.

Use the following to answer questions: Suppose that the interest rate in Canada is 4%,in Japan it is 7%,and financial assets in the two countries are equal in risk. -(Scenario: Japan and Canada) Refer to Scenario: Japan and Canada.The implication is that:

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows.At an interest rate of 4%,the total quantity of loanable funds demanded across the two markets is _____ the total quantity of loanable funds supplied by lenders.

Use the following to answer questions: Suppose that the interest rate in Canada is 4%,in Japan it is 7%,and financial assets in the two countries are equal in risk. -Direct foreign investment means the purchase of:

When interest rates are higher in country A than in other countries:

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows.At an interest rate of 4%,the quantity of loanable funds supplied by Canadian lenders is _____ the quantity of loanable funds demanded by Canadian borrowers.

In countries with rapidly growing economies,like China and India,the demand for loanable funds is _ and interest rates are _ than in countries with slowly growing economies.

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows.At an interest rate of 4%,the quantity of loanable funds supplied by British lenders is _____ the quantity of loanable funds demanded by British borrowers.

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows.At an interest rate of 4%,the quantity of loanable funds demanded by Canadian borrowers is _____ the quantity of loanable funds supplied by Canadian lenders.

Quiz 18: International Macroeconomics

Use the following to answer questions: Suppose that the interest rate in Canada is 4%,in Japan it is 7%,and financial assets in the two countries are equal in risk. -(Scenario: Japan and Canada) Refer to Scenario: Japan and Canada.As a result:

If asset owners in Japan and Canada consider Japanese and Canadian assets as good substitutes for each other and if the Canadian interest rate is 5%,while the Japanese interest rate is 2%:

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows.At an interest rate of 4%,the excess of loanable funds supplied by _____ lenders will be exported to _____ borrowers.

Interest rates between two countries tend to converge if:

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows.At an interest rate of 4%,the shortage of loanable funds available to _____ borrowers will be satisfied by _____ lenders.

If asset owners in Japan and Canada consider Japanese and Canadian assets as good substitutes for each other and if the Canadian interest rate is 5% and the Japanese interest rate is 2%,what will NOT occur?

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows.At an interest rate of 4%,the quantity of loanable funds demanded by British borrowers is _____ the quantity of loanable funds supplied by British lenders.

Use the following to answer questions: Suppose that the interest rate in Canada is 4%,in Japan it is 7%,and financial assets in the two countries are equal in risk. -(Scenario: Japan and Canada) Refer to Scenario: Japan and Canada.The implication is that:

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows.At an interest rate of 4%,the total quantity of loanable funds demanded across the two markets is _____ the total quantity of loanable funds supplied by lenders.

Use the following to answer questions: Suppose that the interest rate in Canada is 4%,in Japan it is 7%,and financial assets in the two countries are equal in risk. -Direct foreign investment means the purchase of:

When interest rates are higher in country A than in other countries:

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows.At an interest rate of 4%,the quantity of loanable funds supplied by Canadian lenders is _____ the quantity of loanable funds demanded by Canadian borrowers.

In countries with rapidly growing economies,like China and India,the demand for loanable funds is _____ and interest rates are _____ than in countries with slowly growing economies.

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows.At an interest rate of 4%,the quantity of loanable funds supplied by British lenders is _____ the quantity of loanable funds demanded by British borrowers.

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows.At an interest rate of 4%,the quantity of loanable funds demanded by Canadian borrowers is _____ the quantity of loanable funds supplied by Canadian lenders.

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows.At an interest rate of 4%,the excess of loanable funds supplied by _ lenders will be exported to _ borrowers.

Use the following to answer questions: -(Figure: International Capital Flows) Refer to Figure: International Capital Flows.At an interest rate of 4%,the shortage of loanable funds available to _ borrowers will be satisfied by _ lenders.

In countries with rapidly growing economies,like China and India,the demand for loanable funds is _ and interest rates are _ than in countries with slowly growing economies.