QUESTIONS FOR REVIEW

1. Define exports and net capital outflow. Explain how and why they are related.

2. Explain the relationship among saving, investment, and net capital outflow.

3. If a Japanese car costs 500,000 yen, a similar American car costs $10,000, and a dollar can buy 100 yen, what are the nominal and real exchange rates?

4. Describe the economic logic behind the theory of purchasing-power parity.

5. If the Fed started printing large quantities of U.S. dollars, what would happen to the number of Japanese yen a dollar could buy?