College

We appreciate your visit to Suppose you are the Purchasing Manager for a large chain of restaurants in the United States and you need to make your semiannual purchase of. This page offers clear insights and highlights the essential aspects of the topic. Our goal is to provide a helpful and engaging learning experience. Explore the content and find the answers you need!

Suppose you are the Purchasing Manager for a large chain of restaurants in the United States, and you need to make your semiannual purchase of tea. You pay $1,500,000 for a shipment of tea from an Indian tea producer.

1. What is the impact of this purchase on US imports and capital flows?

2. What is the impact of this transaction on US net exports?

How would these same flows be impacted by these transactions?

a. The Indian tea producer purchases $1,500,000 worth of stock spread out over a few U.S. companies.

b. The United States sells $1,500,000 worth of bonds to the Indian tea producer.

c. The Indian tea producer hangs on to the $1,500,000 so that it can use the U.S. dollars to make investments.

Answer :

Final answer:

The purchase of tea from an Indian producer increases U.S. imports and decreases U.S. net exports by $1,500,000. Subsequent transactions like the tea producer buying U.S. stocks or bonds or holding onto the dollars would positively affect U.S. capital flows, as it would represent an inflow of capital.

Explanation:

When the Purchasing Manager of a U.S. restaurant chain pays $1,500,000 for a shipment of tea from an Indian producer, this transaction increases U.S. imports by the same amount. This purchase is an outflow of capital from the U.S., because money is flowing out of the country to pay for the tea. Consequently, this transaction would decrease U.S. net exports because imports are subtracted from exports when calculating net exports. If the net amount of exports is negative, it implies that the country is importing more than it is exporting, which affects the trade balance.

In scenario (a), if the Indian producer invests in U.S. stocks, this constitutes an influx of capital, which affects the U.S. capital flows positively. Scenario (b) also represents an influx of capital as the Indian producer is purchasing U.S.-issued bonds. Lastly, scenario (c) suggests that the Indian producer is holding onto U.S. dollars for future investments which means they're investing in U.S. assets or may do so in the future, again positively affecting U.S. capital flows.

Thanks for taking the time to read Suppose you are the Purchasing Manager for a large chain of restaurants in the United States and you need to make your semiannual purchase of. We hope the insights shared have been valuable and enhanced your understanding of the topic. Don�t hesitate to browse our website for more informative and engaging content!

Rewritten by : Barada

Answer


The answer and procedures of the exercise are attached in the following archives.


Explanation


You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.