A4 Comparison of Global Current Account surpluses (green and blue bars) andGlobal Current Account Deficits (pink and red bars) are close to identical inmagnitude.Explain why this symmetry is observed. In other words, is the similarity due tocoincidence? Or can it be explained by fundamental economic factors?Surpluses (+) +$1,750& Deficits (-)(billions ofU.S. dollars) +1,390- Cemany+1,250China-JapanStze of+1,000camentMajor ol egorterssuplas àycountrygop750Hong Kong, Singapore.Tariaan, Kores. Indonesia.Malaysia-Ceher surplus countrles250-250- Cther deficit ceuntrie-s00AuntralaUnited KingdomSlew ofament-750counedeficit bycontryUnited States-1,000goup-1.20-1,500

ANSWER The symmetry in the chart can be described by the concept of international trade or Open…

Answered: Comparison of Global Current Account…

Comparison of Global Current Account surpluses (green and blue bars) and Global Current Account Deficits (pink and red bars) are close to identical in magnitude.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter23: The International Trade And Capital Flows

Section: Chapter Questions

Problem 44P: Imagine that the U.S. economy finds itself in the following situation: a government budget deficit...

See similar textbooks

Related questions

Q: Now consider a small open economy, assuming domestic output is held constant and the country…

A: A small open economy's currency is impacted heavily by capital flows.

Q: The immediate impact on the balance of trade (BOT) for a country in deficit when there is an…

A: The balance of trade account is one that records all the amount of goods and services exchanged by…

Q: What is meant by current account deficit and current account surplus? State their significance

A: A balance of payment account is a record of international transactions of an economy over a…

Q: Will exchange rates correct a balance-of-trade deficit? Consider the case of a balance-of-trade…

A: The balance of trade deficit occurs when the value of imports of a country exceeds the value of its…

Q: Future U.S. deficits could be decreased

A: Fiscal deficit means that government's expenditure is more than it's revenue. Future U.S. deficits…

Q: Expansionary fiscal policy is a useful instrument which can be used to stimulate aggregate spending…

A: The fiscal policy is the government policy in which government uses tax and government expenditure…

Q: What is the difference between foreign sales revenues and foreign purchase expenses called? A)…

A: In the international market, as the home country makes a record of all the inflow and outflow of…

Q: Indicate whether the following statements are true, false, or uncertain and explain why. 1. A…

A: Let's have a look on the statements below:

Q: “There has been a turnaround from the sizeable net outflows over the past two years when South…

A: Strategic features of the turnaround strategy for the year Included: • Worked to improve the…

Q: Japan has run large current account surpluses for much of the past two decades, yet no one ever asks…

A: Balance of trade of a country denotes the imports and exports of the country.

Q: Explain the three different viewpoints (meanings) of the current account balance. Discuss the…

A: The current account measures the value of exports and imports of goods and services, income flows,…

Q: In a flexible exchange rate system with perfect capital mobility, expansionary fiscal policy will…

A: A flexible exchange rate(FER) system defines as the rate of exchange between two counties which is…

Q: Label the following statements as true, false or uncertain, and provide explanation for your answer.…

A: Introduction A) Yes it is true because floating exchange rate is very flexible and determined by…

Q: Which of the following is one of the indicators of a rising balance of payments deficit? Multiple…

A: Answer: A balance of payment deficit arises when a country imports more than its exports. The…

Q: Would it be accurate to think of a fixed exchange rate as a simultaneous price ceiling and price…

A: No, it would not be accurate to think of a fixed exchange rate as a simultaneous price ceiling and…

Q: If Canada borrows more from the foreign countries than it lends to the foreign countries, then…

A: here we find the correct answer as follow;

Q: (D). A current account deficit (CA Y) and national saving is less than investment spending (S < I).…

A: Current Account Deficit measures the trade value of a country, where the goods and services that are…

Q: A Current account deficit often raises the opposition of protectionists who think that a current…

A: There are other points of disagreement, including the definition of a current account deficit or…

Q: EXPLAIN IN DETAIL GENERAL ASPECTS OF BALANCE OF TRADE.

A: The Balance of trade (BOT) can be defined as the difference between the value of a country's imports…

Q: Select all of the following statements which can be said of a country with a current account deficit…

A: The current account deficit is a measurement of a country’s trade where the value of the goods and…

Q: The elasticities approach and the absorption approach are theories of the balance of trade that…

A: The elasticity approach and the absorption approach are the two important models which were designed…

Q: What will happen to the US trade deficit if the US is in a recession while our trading partners are…

A: Trade deficit happens when the country’s export fell and import rises, it means the situation where…

Q: The macroeconomic view of a trade deficit implies that, other things equal, the imposition of a…

A: Trade deficit is a situation in which value of a country's imports exceeds the value of exports.

Q: A point to the left of the balance of payments schedule (BP curve) would represent

A: Balance of Payment is a statement in which all the financial transactions made in a certain period…

Q: In the balance of payments statement, a current account surplus will be matched by a capital and…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: A current account deficit is generally a result of: a large amount of U.S. purchases of…

A: Current account deficit:The current account deficit refers the measures of a country's trade where…

Q: Based on the table below, which of the following is likely to be true? a. From the first period to…

A: I the mentioned question, we have to answer as per the data present in the table. Lets discuss one…

Q: In the balance of payments, a current account deficit is balanced by a capital account surplus. True

A: Balance of payments (BOP) is a record of transactions made between residents of a country and the…

Q: If a country consistently runs net export surpluses, then what will happen to its exchange rate?

A: A trade surplus occurs when the result of the above calculation is positive. A trade surplus…

Q: Ricardian equivalence suggests that government budget deficits generated by decreases in current…

A: Current account:- it is a record of a country's transactions of goods and services, net earnings on…

Q: A country finds itself in the following situation: a government budget deficit of $700; total…

A: ANSWERThere are two main sources for the supply of financial capital in the U.S. economy: saving by…

Q: Comment on the folllowing statement "Since the United States imports more than it exports it is…

A: Capital account and Current account Answer: Capital account and current account are the important…

Q: Under fixed exchange rate system and small open economy, expansionary fiscal policy is effective…

A: Fixed exchange rate regime is where a country's value is fixed by some monetary authority against…

Q: In the two-period SOE model, if the real interest rate decreases and the current account is…

A: Real interest rate is the nominal interest rate adjusted for inflation. It represents the increase…

Q: The macroeconomic view of a trade deficit implies that, other things equal, the imposition of a…

A: A trade deficits occurs when a nation's imports is more than its exports. So, the macroeconomic view…

Q: In open economies, policy makers are motivated by the goal of internal balance and external balance.…

A: Internal Balance is defined as a situation in which the consumption in a given economy hardly equals…

Q: ollowing questions relate to macroeconomic balance (internal and external balance) assume that…

A: Internal balance in an economy means that the economy is at the level of full employment. on other…

Q: If the federal government is running a surplus, Question 15 options: taxes must fall…

A: Budget surplus It refers to a situation in which the expenditure of government is less than its…

Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

Comparison of Global Current Account surpluses (green and blue bars) and
Global Current Account Deficits (pink and red bars) are close to identical in
magnitude.
Explain why this symmetry is observed. In other words, is the similarity due to
coincidence? Or can it be explained by fundamental economic factors?
Surpluses (+) +$1,750
& Deficits (-)
(billions of
U.S. dollars) +1,390
- Cemany
+1,250
China
-Japan
Stze of
+1,000
cament
Major ol egorters
suplas ày
country
gop
750
Hong Kong, Singapore.
Tariaan, Kores. Indonesia.
Malaysia
-Ceher surplus countrles
250
-250
- Cther deficit ceuntrie
-s00
Auntrala
United Kingdom
Slew of
ament
-750
coune
deficit by
contry
United States
-1,000
goup
-1.20
-1,500

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Why does the trade balance and the current account balance track so closely together over time?
How did large trade deficits hurt the East Asian countries in the mid 1980s? (Recall that trade deficits are equivalent to inflows of financial capital from abroad.)
Imagine that the U.S. economy finds itself in the following situation: a government budget deficit of 100 billion, total domestic savings of 1,500 billion, and total domestic physical capital investment of 1,600 billion. According to the national saving and Investment Identity, what will be the current account balance? What will be the current account balance if Investment rises by 50 billion, while the budget deficit and national savings remain the same?
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?
11. Assuming that all transactions are recorded, if the United States has an overall deficit (–) in itscurrent account, what is the implication for the balances of the other accounts (capital and financial)? a. When added (FA + KA), they must be in surplus (+) by exactly the same amount.b. Their difference (FA – KA) is equal to the deficit (–) in the current account. c. When added (FA + KA), they will be in deficit by exactly the same amount. d. Their difference (FA – KA) must be equal to zero.
The United States’ total international transactions with other countries in 2005 were: U.S. balance on current account: - $748.7 billionFinancial inflows : + $1295.2 billionFinancial outflows : - $532.6 billion Was the current account in surplus or deficit? Was the capital account in surplus or deficit?Was the overall BOP in surplus or deficit? Please only answer C.) C.) Did the government official reserve transactions account show an increase or decrease of its foreign currency holdings
‘According to David Hume’s theory of automatic price adjustment, countries experiencing current account deficit see price levels decrease, making them more competitiveandincreasingexports. That makes the current account deficit disappear.’. Critically explore this statement and provide examplesto confirm or disprove it.
You have the following annual data for the New Zealand economy ($bn): GDP (Y) = 190 Gross National Disposable Income (Yd) = 183 Net exports of goods and services (NX) = 5 Private Consumption (C) = 112 Government consumption (G) = 38 Based on this data, complete the following paragraph (enter numbers only). Investment (I) is equal to $____bn. The current account (surplus or deficit?) is equal to $_____bn. The capital account part of the balance of payments (which for the purposes of this question includes both capital and financial accounts) therefore shows a ____ of $_____bn. National savings is equal to $______bn.
Pls help with below homwork, Explain why each incorrect answer is incorrect and the correct answer is correct. A current account deficit implies that : Select One : A. the financial account is negative B. the financial account is in surplus C. exports of goods and services exceed imports of goods and services D. unilateral transfers are positive.
2.2) Explain with an example why the current account and financial account balances must exactly offset each other. Provide example with illustration.
The nation of Pecunia had a current account deficit of $1 billion and a nonreserve financial account surplus of $500 million in 2021. a) What was the balance of payments of Pecunia in that year? What happened to the country’s net foreign assets? b) Assume that foreign central banks neither buy nor sell Pecunian assets. How did the Pecunian central bank’s foreign reserves change in 2021? How would this official intervention show up in the balance of payments accounts of Pecunia? c) How would your answer to (b) change if you learned that foreign central banks had purchased $600 million of Pecunian assets in 2021? How would these official purchases enter foreign balance of payments accounts? d) Draw up the Pecunian balance of payments accounts for 2021 under the assumption that the event described in (c) occurred in that year.
Consider the case of Turkey, an open macrocconomy with flexible exchange rates and in an initial equilibrium where the economy is producing at the full-capacity utilization (the natural) rate of output (Ys). The economy runs a trade deficit. Assume that the government has two alternative options to tight with the adverse effects of the global recession: an expansionar) monetary policy or an expansionary fiscal policy. Using the IS-LM-UIP frame, oik, for each of the policy options demonstrate the effects on Y, U, 14, E, C, 1, IM, X and NX. Would you recommend an expansionary monetary policy or an expansionary fiscal policy to the government according to the predictions of the IS-LM-UIP framework and the Marshall-Lerner condition?