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Open-economy macroeconomic model

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Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?

  • corporate bond, municipal bond, U.S. government bond
  • corporate bond, U.S. government bond, municipal bond
  • municipal bond, U.S. government bond, corporate bond
  • U.S. government bond, municipal bond, corporate bond

Suppose that the real exchange rate between the United States and Brazil is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate (that is increase the number of baskets of Brazilian goods a basket of U.S. goods buys)?

  • an increase in the quantity of Brazilian currency that can be purchased with a dollar
  • a decrease in the price of U.S. goods
  • an increase in the price in Brazilian currency of Brazilian goods
  • All of the above are correct

At the equilibrium real interest rate in the open-economy macroeconomic model

  • saving = domestic investment
  • saving = net capital outflow
  • net capital outflow = domestic investment
  • net capital outflow + domestic investment = saving

 

Reference no: EM131334606

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