Assurme the following to be a portion of the sirmplified balance of payments statement for a hypothetical country. The values are given in billions of dollars.Exportss00ImportsCapital OutflowsCapital Inflows- S600- S200$120If the central bank has not changed its holding of foreign-currency reserves during this period, then the capital-service account for this country should Iequal to S billion.

Capital service account: A capital service account or capital account is the account that shows all…

Assume the following to be a portion of the simplified balance of payments statement for a hypothetical country. The values are given in billions of dollars. Еxports Imports Capital Outflows Capital Inflows sa00 - S600 - S200 $120 If the central bank has not changed its holding of foreign-currency reserves during this period, then the capital-service account for this country should be equal to S billion

Assume the following to be a portion of the simplified balance of payments statement for a hypothetical country. The values are given in billions of dollars. Еxports Imports Capital Outflows Capital Inflows sa00 - S600 - S200 $120 If the central bank has not changed its holding of foreign-currency reserves during this period, then the capital-service account for this country should be equal to S billion

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter19: The International Monetary System: Order Or Disorder

Section: Chapter Questions

Problem 4DQ

See similar textbooks

Similar questions

Imagine that the economy of Germany finds itself in the following situation: the government budget has a surplus of 1 of Germanys GDP; private savings is 20 of GDP; and physical investment is 18 of GDP. Based on the national saving and investment identity, what is the current account balance? If the government budget surplus falls to zero, how will this affect the current account balance?
Does a higher rate of return in a nations economy, all other things being equal, affect the exchange rate of its currency? If so, how?
If foreign investors buy more U.S. stocks and bonds, how would that show up in the current account balance?
Use the demand-and-supply of foreign currency graph to determine what would happen to a small, open economy that experienced capital outflows.
Is a country for which imports and exports comprise a large fraction of the GDP more likely to adopt a flexible exchange rate or a fixed (hard peg) exchange rate?
If a countrys currency is expected to appreciate in value, what would you think will be the impact of expected exchange rates on yields (e.g., the Interest rate paid on government bonds) in that country? Hint: Think about how expected exchange rate changes and interest rates affect a currencys demand and supply.
Why does the trade balance and the current account balance track so closely together over time?
State whether each of the following events Involves a financial flow to the Mexican economy or a financial flow out of the Mexican economy: Mexico Imports sen4ces from Japan Mexico exports goods to Canada U.S. investors receive a return from past financial investments in Mexico
The demand for Australian dollars in the foreign exchange market equals 14000 – 3000e and thesupply of Australian dollars in the foreign exchange market equals 2000 + 2000e, where e is thenominal exchange rate expressed in euros per Australian dollar. If the Australian dollar is fixed at 2euros per Australian dollar, then to maintain this fixed rate, what is the required change in theReserve Bank of Australia’s holdings of euros? 1increase by 4000 euros 2decrease by 2000 euros 3decrease by 4000 euros 4increase by 2000 euros
The nation of Narnia had a current account deficitof $423 million and a nonreservefinancial account surplus of $360 million in year3695. a.What was the balance of payments of Pecunia in thatyear? What happenedto the country’s net foreign assets? b.If there is a sudden increase in sales of goods andservices to foreigners,what effect do you expect in the Balance of Paymentaccount? c.How would the increase in domestic interest rate inyear 3695 affect thebalance of payment?
Exchange rates are an important factor when doing business internationally. Please discuss: a. Potential mechanisms through which exchange rates affect revenues of multinational enterprises (MNEs) doing foreign direct investment (FDI) in a given foeign countryn (include atleast 3 mechanisms ). b. What stratergies can MNEs employ to hedge against the risks of stemming from foreign exchange (include atleast two potential stratergies).
Suppose that Americans decide to increase theirsaving.a. If the elasticity of U.S. net capital outflow withrespect to the real interest rate is very high, willthis increase in private saving have a large orsmall effect on U.S. domestic investment?b. If the elasticity of U.S. exports with respect to thereal exchange rate is very low, will this increase inprivate saving have a large or small effect on theU.S. real exchange rate?