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- In the late 1990s, the U.S. government moved from a budget deficit to a budget surplus and the trade deficit in the U.S. economy grew substantially. Using the national saving and investment identity, what can you say about the direction in which saving on/or investment must have changed in this economy?A booming economy can attract financial capital inflows, which promote further growth. However, capital can just as easily flow out of the country, leading to economic recession. Is a country whose economy is booming because It decided to stimulate consumer spending more or less likely to experience capital flight than an economy whose boom Is caused by economic investment expenditure?Question Need help calculating this one. Please show all work. Hints: Equilibrium Condition is S=I. If economy is open r=r*. Assume that in a small open economy where full employment always prevails, national saving is 300. a. If domestic investment is given by I = 400 – 20r, where r is the real interest rate in percent, what would the equilibrium interest rate be if the economy were closed? b. If the economy is open and the world interest rate is 10 percent, what will investment be? c. What will the current account surplus or deficit be? What will net capital outflow be? Assume that in a small open economy where full employment always prevails, national saving is 300. a. If domestic investment is given by I = 400 – 20r, where r is the real interest rate in percent, what would the equilibrium interest rate be if the economy were closed? b. If the economy is open and the world interest rate is 10 percent, what will…
- Consider the following data (in billion $) for a country in a particular year: (assume this country has Zero Transfer Payment Personal consumption expenditure (C) 200 Exports (x) 10 Government Purchases of goods and services (G) 120 Imports (m) 15 Gross Domestic Product (Y) 1800 Taxes 20 d. What is the value of gross investment? e. What is the value of net export? f. Is the country lending to or borrowing from rest of the world? g. Dose the government has deficit, balance or surplus budget? h. What is the amount of investment financed by national saving? i. What is the amount of investment financed by borrowing from rest of the world? J. What is the meaning of transfer paymentONLY answer! NO explanation! 1. Which of the following statement is true?a) Investment tax incentive increases investment, which increases productivity growth and living standards in the long run.b) Budget deficit reduces investment, which reduces productivity growth and living standards.c) Both investment tax incentive and budget deficit causes net exports to falld) all of the above 2. Which of the following caused a trade deficit in the USA during 1990s?a) Although national saving increased in the 1990s, investment increased even at a faster rate.b) Slowdown in national savings but a rapid increase in investment.c) Huge government deficit.d) An increase in government spending. 3. Let the govt. removed previous tax incentive for investment. What kind of effect will this have on the real interest rate?a) The real interest rate will remain unaffected.b) The real interest rate will increase.c) The real interest rate will decrease.d) No effect. 4. Following the previous question, what…What is a foreign exchange rate? (a) The rate at which the currency of one country trades for the goods ofanother country.(b) The rate at which one country’s goods trade for those of another country.(c) The rate at which currencies of different countries are exchanged.(d) The rate at which one country’s currency trades for gold provided byanother country. Induced consumption is: (a) the part of consumption which is independent of the level of income.(b) the minimum level of consumption that is financed from sources other than income.(c) The maximum level of consumption that is financed from sources other than income.(d) shown by the slope of the consumption function. In the Keynesian model, an introduction of a proportional tax will: (a) increase the slope of the consumption function.(b) reduce the multiplier.(c) increase the equilibrium level of income.(d) increase the multiplier. A decrease in the price level will: (a) shift the AS curve to the left.(b) shift the AD curve to the…
- 4. Relative to a closed economy, it is easier in an open economy toa. pass the burden of government debt on to future generations.b. control interest rates.c. discourage private investment through government borrowing.d. confer monopoly power on key domestic industries.9 Foreign direct investment of china.a. how FDI works in china?b. how it contribute to GDP growth of china give your answer with clear explanationConsider an economy described by the following equations: Y = C + I + G AND, Y = 20,000; G = 4,000; T = 4,000; C = 1000 + 0.80(Y − T); : I= 2,500 – 120r. national saving AND the equilibrium real interest rate equal: Select one: a. national saving 2200 AND the equilibrium real interest rate 2.5%. b. national saving 2500,AND the equilibrium real interest rate 2%. c. national saving 4000 AND the equilibrium real interest rate 1.5%. d. national saving 3200 AND the equilibrium real interest rate 2.5%.