A Farm Equipment Retailer in Azerbaijan Exchanges Azerbaijan Manats (The

question 85

Essay

A farm equipment retailer in Azerbaijan exchanges Azerbaijan manats (the currency of Azerbaijan) for $300,000 a bank in Azerbaijan was holding. It uses the $300,000 to buy farm equipment from a U.S. company. The U.S. company deposits half of these funds in a U.S. bank and exchanges the other half for euros from a bank in London.
As a result of these transactions, by how much, if at all, and in which direction did:
A. U.S. net exports change?
B. U.S. net capital outflow change?

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Definitions:

Socially Optimal

A situation or outcome that is most beneficial for society as a whole, often considered in the context of economic efficiency.

Harmful Chemicals

Substances that have the potential to cause damage to living organisms or the environment through exposure, inhalation, ingestion, or skin absorption.

Technology Spillovers

The positive externality that occurs when technological advancements or innovations benefit firms or sectors beyond the inventor or innovator.

Industrial Policy

Government-driven programs and policies aimed at improving the competitiveness and capabilities of domestic industries and sectors.