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Briefly explain whether each of the following statements is true or false.
8. An increase in national saving requires either a rise in investment or an increase in the capital account of the balance of payments.
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- Briefly explain what a change in any part of the national saving and investment identity points out.In an open economy, it is impossible to have national saving equal to domestic investment.Answer true, false, or uncertain. Please briefly explain your answer.Discuss the role of budget surpluses and trade surpluses in national saving and investment
- Suppose that GDP is equal to 1,000, national saving is equal to 200, the current account deficit is equal to 100, and the government budget deficit is equal to 50. Private savings must equal （ ）Briefly explain the circular flow of income in an economy. How does circular flow of income influence in an open economy in a country?What is the saving and investment equation? If national saving declines what will happen to domestic investment and net foreign investment?
- 10.Suppose in a small open economy, real GDP is $500 billion, consumption is $300 billion, investment is $120 billion, government purchases equal $100 billion, exports are $80 billion, and imports are $100 billion. whether this small country’s interest rate, rE, is above, below, or equal to the world interest rate, rw? Is S>I or I>S, or S=I in this economy? Using the saving-investment diagram for a small open economy, show your answer on the graph. Clearly mark both rE and rw and trade deficit/surplus (or capital inflow/outflow).Briefly explain whether investment spending is likely to increase more rapidly in a country with a rapidly growing population or in a country with a slowly growing population. Does your answer depend on whether the country is a high-income industrial country or a low-income developing country?In a closed economy, if Y and T remained the same, but G rose, and C fell but by less than the rise in G, what would happen to public and national saving? a. public and national saving would rise b. public saving would fall and national saving would rise c. public saving would rise and national saving would fall d. public and national saving would fall
- You have the following annual figures for the New Zealand economy. Investment expenditure $42.5 billion Government savings -$1.7 billion Many politicians and commentators would like to see continued increases in investment and current account surpluses rather than deficits. If these events are to occur, what else must be happening in the economy? 1. The Government must raise the retirement age. 2. Government spending must fall 3. National savings (private and government) must rise 4. New Zealand must restrict foreign ownership of land and other assetsA country recently had $800 billion worth of domestic investment and its residents purchased $400 billion worth of foreign assets. If foreigners purchased $100 billion of this country’s assets, what was this country’s saving? Explain how you found your answer.Q4. Suppose that Brazil initially has a higher capital rental rate (r) than the United States. What would be the direction of foreign direct investment (FDI)? Use a world-capital-market graph to show the effects of FDI on the two countries’ rental rates of capital, GDP, and return to labor owners. Identify the net change in world output in the above graph. Discussion: what other effects could FDI cause in the recipient and source countries that are not captured in the model? Your answer