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How would the following transactions affect U.S. exports, imports, and net exports?a. An American art professor spends the summer touring museums in Europe.b. Students in Paris flock to see the latest movie from Hollywood.c. Your uncle buys a new Volvo.d. The student bookstore at Oxford University in England sells a copy of this textbook.e. A Canadian citizen shops at a store in northern Vermont to avoid Canadian sales taxes.
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Chapter 31
Open-Economy Macroeconomics: Basic Concepts
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The Macroeconomics of Open Economies
Ahmad C.
January 29, 2021
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here we have five scenarios, and we need to decide whether imports or exports is increasing or perhaps decreasing. And then that will tell us what's actually happening to net exports. The first one's a little tricky. We have an American touring Europe, I think it says an American art professor is spending the summer touring museums in Europe. So what's actually happening there is He's not necessarily directly buying something right in America from Europe. In other words, he's not buying an important good, but he is spending his American dollars overseas in Europe. Well, at some point, those dollars have to find their way back to the United States. So what is that going to do? That's actually going to increase American exports? Because those dollars are going to be spent by Europeans for American goods. So we'll see exports go up, and that will cause net exports to go up. How about for the second case? We have people from Parrish. I believe it is watching movies from Hollywood, so that's an American product show that's going to cause exports in America again to go up, which will cause net exports to go up. What if an American buys a foreign car of although, well, that's going to cause imports to go up, which causes net exports to go down. What about a English student in Cambridge? Excuse me, Oxford Oxford University. Buying an American textbook? Well, that would be an example of American exports going up, which will cause net exports to go up. Finally, we have a Canadian shopping in Vermont because they're trying to avoid Canadian sales. Tax is what's going to happen here. Well, now the Canadian is spending money in America. What will that do that rule cause those Canadian dollars well, say, see dollars, right? They were spent in America. They have to find their way back to candidate some point. In other words, an American is going to use those Canadian dollars toe by some Canadian goods. When that happens, you will see imports in America go up, which will cause net exports to go down. So you'll see that this first case in the last case are actually the opposite of each other, right? You have an American buying goods overseas, and then you have a foreigner buying goods in America
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