Consider an open economy. If aggregate desired saving is greater than aggregate desired investment, then: a. Current account balance is positive b. Current account balance is negative c. Financial account balance is positive d. Interest rate is negative
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- Consider the following economy:- Mariginal propensity to save = 0.2 Mariginal propensity to import = 0.2 Investment = $500 Governement spending = $300 Taxes = $ 200 Exports = $400 Autonomous import spending = $100 Given this information, What is initial current account balance for the economy? A - Current account deficit of $205 B - Current account deficit of $125 C - Current account surplus of $125 D - Current account surplus of $150 E - None of the above(D). A current account deficit (CA < 0) implies two things: absorption is more than national income (A > Y) and national saving is less than investment spending (S < I). Label the following statements as true, false or uncertain, and provide explanation for your answer.Imagine that the economy of Germany finds itself in the following situation: the government budget has a surplus of 1% of Germany’s GDP; private savings is 20% of GDP; and physical investment is 18% of GDP. a. Based on the national saving and investment identity, what is the current account balance? b. If the government budget surplus falls to zero, how will this affect the current account balance?
- Assume that the following details apply to the U.S. economy: Government budget deficit: $150 billion. Domestic Savings: $2,000 billion Domestic physical capital investment: $2,500 billion According to the national saving and investment identity, what will be the current account balance? A) $2,000 billion B) $2,650 billion C) $2,150 billion D) $650 billionConsider the following economy:- Mariginal propensity to save = 0.2 Mariginal propensity to import = 0.2 Investment = $500 Governement spending = $300 Taxes = $ 200 Exports = $400 Autonomous import spending = $100 Given this information, beginning at the intial equilibirum output, suppose instead that exports rise by 50. What is the change in current account balance? A: -$25 B: $45 C: -$75 D: $35 E - None of the aboveA government finds itself in the following situation: a government budget deficit of $900; total domestic savings of $2000, and total domestic physical capital investment of $1300. According to the national saving and investment identity, if investment increases by $200 while the government budget deficit decreases by $100 and savings remain the same, what will happen to the current account balance?
- a)In the two-period small open economy model, explain how the nation makes its choices. b) In the two-period SOE model, suppose that the country is initially running a current account deficit. Then, suppose that the real interest rate falls. Determine the equilibrium effects, and explain.You have the following annual figures for the New Zealand economy. Investment expenditure $42.5 billion Government savings -$1.7 billion The current account balance is not zero. In fact the current account deficit is $6.0 billion. What is New Zealand's actual private sector savings figure? $____billion (use 1 d.p.).Consider the following economy:- Mariginal propensity to save = 0.2 Mariginal propensity to import = 0.2 Investment = $500 Governement spending = $300 Taxes = $ 200 Exports = $400 Autonomous import spending = $100 Given this information, if governemnt spending falls by $50, what is the change in current account balance? A: -$35 B: -$15 C: -$75 D: $35 E - None of the above
- The figure below shows the flow of goods, services, and payments between Kenya (home country) and the rest of the world. with reference to the figure, explain; a) How does the bottom portion, showing the international flow of investments and capital differs from the upper portion. b) The relationship between a current account deficit or surplus and the flow of funds.If NX>0 then A. S<I since foreign investment in the domestic economy balances BOP B. S>I since foreign investment (FI) balances BOP C. CA<0 to balance BOP D. S<I to pay for imports through the financial account (FA>0) Detailedly Explanation please, Thank you!What happens when international financial capital is completely free to move in and out of countries in search of investment or speculation opportunities? a. Countries lose autonomy to affect GDP through monetary policy under a free-floating exchange rate policy. b. None of the alternatives is correct. c. Countries lose autonomy to affect GDP through fiscal policy under a fixed exchange rate policy. d. Countries lose autonomy to affect GDP through fiscal or monetary policies regardless of the exchange rate policy. e. Countries retain autonomy to affect GDP through fiscal or monetary policies regardless of the exchange rate policy.