Suppose in the goods market equilibrium of an open economy, saving is $6 billion, and investment is $8 billion. Assume there is no measurement error. Then capital and financial account balance is equal to:
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- A 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?In an open economy,a change in domestic net foreign asset depends on how much is saved, and on investment,which reduces the domestic net foreign asset. True or False.National savings of a Classical small open economy is 120, Investment is 20, and the net export schedule is: NX = 200 - 50*(real exchange rate). If trade restrictions shift the net export function to NX = 300 - 50*(real exchange rate), in the new situation:
- Describe the factors that affect saving and investment and determine the current account balance in a small open economy.Consider a small open economy with desired national saving of S^d=1000+1000r^w and desired investment of I^d=1000-500r^w. Calculate national saving, investment and the current account balance in equilibrium when the real world interest rate is: r^w=0.025 r^w=0.050 r^w=0.000 r^w=1.000In an open economy, why is the demand curve for dollars in the foreign-currency exchange market downward sloping? When the value of the domestic currency depreciates, domestic goods become less expensive relative to foreign goods, making domestic goods more attractive to domestic and foreign consumers. Net capital outflow equals net exports. A depreciation in the domestic currency causes exports to fall and imports to rise and, therefore, net exports to fall. A depreciation of the dollar reduces the quantity of dollars demanded in the market for foreign-currency exchange.
- suppose a country has a balance on its current account of negative $10 billion, while the balance on its capital account is a positive $4 billion. What can we conclude?The Current Account DOES NOT include: a. Portfolio Investment b. Net income investments in other countries c. Payments in connection with foreign trade. d. Interest on loans to other countries.A surplus on the current account of the balance of payments indicates that: (1) Financial inflows are less than financial outflows;(2) Imports are greater than exports;(3) Financial inflows are greater than financial outflows;(4) Exports are greater than imports
- The capital account balance is a nation's: net investment income minus its net transfers exports of goods and services minus its imports of goods and services sale of real and financial assets to people living abroad minus its purchases of real and financial assets from foreigners domestic investment spending minus domestic savingChina had a $214 billion overall current account surplus in 2012. Assuming that China’s net debt forgiveness was zero in 2012 (its capital account balance was zero), by how much did Chinese purchases of financial and real assets abroad exceed foreign purchases of Chinese financial and real assetsIf the current account is in surplus and the capital account is zero, then the financial account must be in deficit. the trade balance must be in deficit. the balance of payments must be in deficit. there is a capital inflow.
