Initially, real interest rates in the United States, South Africa, and Mexico are all equal, at 6 percent. Then the central banks alter their policies so that the American interest rate rises to 8 percent, the South African rate falls to 4 percent, and the  Mexican rate stayed at 6 percent.   Select one of the following:       A.  Capital will flow to countries with high interest rate. In this case, the United States will attract more inflows than South Africa and Mexico. South Africa will face maximum capital outflow. Balance of trade will deteriorate for the country with the highest rate of capital inflow     B.   Capital will flow to countries with the low-interest rate.  In this case, South Africa will have the highest rate of capital inflow, Mexico will have the second highest, and the United States the least. The balance of trade will deteriorate for the country with the highest rate of capital outflow.      C.    Capital will flow to the United States not because of the high-interest rate but because of perceptions of “safety and soundness”.  The balance of trade will be indeterminate.      D.  None of the above.

As international businesses look to emerging markets for growth opportunities and access to resources, they will evaluate the business environments of the countries under consideration. Argentina is the largest country in South America, and its terrain includes mountains, lakes, glaciers, and grasslands. It is resource rich—producing soybeans, wheat, wine, and beef. It has more arable land per person than all but five nations in the world. Argentina has the world’s third largest shale-oil and gas fields. With a population of more than 45 million and rich natural resources, Argentina might seem to be a desirable market for international businesses. Despite this, Argentina is known as a rich country made poor. Consider these points of interest about Argentina. In 1913, Argentina was the 10th wealthiest country in the world, ahead of Norway, France, Germany, and Japan. Today, it is in 85th place, behind Russia and China, with a per-capita income of $10,000. Demographically, Argentina…

Which of the following is an example of U.S. foreign portfolio investment? Select one: a.Erica, a U.S. resident, buys bonds issued by the Swiss government. b.Neither A nor B are examples of U.S. portfolio investment. C.A U.S. legal office opens a branch office in Holland. d.Both A and B are examples of U.S. portfolio investment.

A government official announces a new policy. The country wishes to eliminate its trade deficit, but will strongly encourage financial investment from foreign firms. Explain why such a statement is self- contradictory.