【正文】 .Figure 3044. a. A decline in the quality of . goods at a given real exchange rate would reduce net exports, reducing the demand for dollars, thus shifting the demand curve for dollars to the left in the market for foreign exchange, as shown in Figure 305.b. The shift to the left of the demand curve for dollars leads to a decline in the real exchange rate. Since net foreign investment is unchanged, and net exports equals net foreign investment, there is no change in equilibrium in net exports or the trade balance.c. The claim in the popular press is incorrect. A change in the quality of . goods cannot lead to a rise in the trade deficit. The decline in the real exchange rate means that we get fewer foreign goods in exchange for our goods, so our standard of living may decline.Figure 3055. A reduction in restrictions of imports would reduce net exports at any given real exchange rate, thus shifting the demand curve for dollars to the left. The shift of the demand curve for dollars leads to a decline in the real exchange rate, which increases net exports. Since net foreign investment is unchanged, and net exports equals net foreign investment, there is no change in equilibrium in net exports or the trade balance. But both imports and exports rise, so export industries benefit.6. a. When the French develop a strong taste for California wines, the demand for dollars in the foreigncurrency market increases at any given real exchange rate, as shown in Figure 306.Figure 306b. The result of the increased demand for dollars is a rise in the real exchange rate.c. The quantity of net exports is unchanged.7. An export subsidy increases net exports at any given real exchange rate. This causes the demand for dollars to shift to the right in the market for foreign exchange, as shown in Figure 307. The effect is a higher real exchange rate, but no change in net exports. So the senator is wrong。 an export subsidy will not reduce the trade deficit.Figure 3078. Higher real interest rates in Europe lead to increased . net foreign investment. Higher net foreign investment leads to higher net exports, since in equilibrium net exports equal net foreign investment (NX=NFI). Figure 308 shows that the increase in net foreign investment leads to a lower real exchange rate, higher real interest rate, and increased net exports. Figure 3089. a. If the elasticity of . net foreign investment with respect to the real interest rate is very high, the lower real interest rate that occurs because of the increase in private saving will increase net foreign investment a lot, so . domestic investment won39。t increase much.b. Since an increase in private saving reduces the real interest rate, inducing an increase in net foreign investment, the real exchange rate will decline. If the elasticity of . exports with respect to the real exchange rate is very low, it will take a large decline in the real exchange rate to increase . net exports by enough to match the increase in net foreign investment.10. a. If the Japanese decided they no longer wanted to buy . assets, . net foreign investment would increase, increasing the demand for loanable funds, as shown in Figure 309. The result is a rise in . interest rates, an increase in the quantity of . saving (because of the higher interest rate), and lower . domestic investment.Figure 309b. In the market for foreign exchange, the real exchange rate declines and the balance of trade increases.11. The flight to safety led to a desire by foreigners to buy . government bonds, resulting in a decline in . net foreign investment, as shown in Figure 3010. The decline in net foreign investment also means a decline in the demand for loanable funds. As the figure shows, the shift to the left in the demand curve results in a decline in the real interest rate in the United States. In addition, the decrease in net foreign investment decreases the supply of dollars in the foreignexchange market, causing the dollar to appreciate, shown as a rise in the real exchange rate. The lower real interest rate causes national saving to decline, but increases domestic investment. Since net foreign investment is lower, net exports are lower, thus the trade balance declines.Figure 301012. a. When . mutual funds bee more interested in investing in Canada, Canadian net foreign investment declines as the . mutual funds make portfolio investments in Canadian stocks and bonds. The demand for loanable funds shifts to the left and the net foreign investment curve shifts to the left, as shown in Figure 3011. As the figure shows, the real interest rate declines, thus reducing Canada’s private saving, but increasing Canada’s domestic investment. In equilibrium, Canadian net foreign investment declines.b. Since Canada39。s domestic investment increases, in the long run, Canada39。s capital stock will increase.c. With a higher capital stock, Canadian workers will be more productive (the value of their marginal product will increase) so wages will rise. Thus Canadian workers will be better off.d. The shift of investment into Canada means increased . net foreign investment. As a result, the . real interest rises, leading to less domestic investment, which in the long run reduces the . capital stock, lowers the value of marginal product of . workers, and therefore decreases the wages of . workers. The impact on . citizens would be different from the impact on . workers because some . citizens own capital that now earns a higher real interest rate.Figure 3011Harcourt, Inc. items and derived items copyright 211。 2001 by Harcourt, Inc.