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- The macroeconomic view of a trade deficit implies that, other things equal, the imposition of a tariffwill reduce South Africa's trade deficit A Because exports will be promoted and imports cannot possibly changeB Because imports will be reduced and exports cannot possibly changeC Only if the tariff has no impact on South Africa's spending or incomeD Only if the tariff leads to increased income in South Africa relative to its spendingConsider a small open economy. Assume that GDP (Y) is 5000. Consumption (C) is given by the equation C = 1000 + 0.25(Y-T). Investment (I) is given by the equation I = 1500 – 50r, where r is the real interest rate in percentage points. The world interest rate is actually 5% (r*=5). Taxes (T) are 1000 and government spending (G) is 1500. Net exports are given by the equation NX=500-250Ɛ. Suppose T and G at their initial values (1000 and 1500). Suppose there is a shift in the global supply of funds, so that the new world interest rate becomes 3%. Compute the equilibrium real exchange rate. Represent the equilibrium graphically and interpret your result.a Figure 1 shows the exogenous world interest rate (r*) determines the level of investment (I) and the difference between saving (S) and investment determines net capital outflow and net exports (NX) for a small open economy. What would happen to I, NX and S if: i. The government of this small open economy uses expansionary fiscal policy. ii. The government of other countries (abroad) uses contractionary fiscal policy. b Suppose the price of a cup of tea is Rs.50 in Pakistan and $2 in USA, the value of nominal exchange rate is $0.006364 per PKR. Calculate the value of real exchange rate (ε) and interprete its meaning. Also, discuss the relationship between net exports (NX) and real exchange rate. c Briefly explain the theory of purchasing power parity (PPP) with the help of example.
- A country's annual imports are I(t) = 30e0.2t and its exports are E(t) = 20e0.1t, both in billions of dollars, where t is measured in years and t = 0 corresponds to the beginning of 2000. Find the country's accumulated trade deficit (imports minus exports) for the 10 years beginning with 2000. (Round your answer to the nearest billion dollars.)Stock Prices, News, and BusinessConditionsGrant McQueenBrigham Young UniversityV. Vance RoleyUniversity of WashingtonPrevious research finds that fundamental mac- roeconomic news has little effect onstock prices. We show that after allowing for different stages of the business cycle, astronger relationship between stock prices and news is evident. In addition to stockprices, we examine the effect of real activity news on proxies for expected cash cowsand equity discount rates. We find that when the economy is strong the stock marketresponds negatively to news about higher real economic activity. This negativerelation is caused by the larger increase in discount rates relative to expectedcash flows.Apart from some types of monetary information, there is little empirical evidence tosupport the hypothesis that stock prices respond to macroeconomic news. Schwert (1981)finds that the daily response of stock prices to news about inflation from 1953 to 1978 isweak and slow. Pearce and Roley…(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.
- Please refer to this question as you answer the one attached since they are linked. a)What is equilibrium income in hypothetica,what is the government deficit? What is the current account balance?The equilibrium condition for GDP in an open economy is: Y = C + I + G + (X – M) GDP can be eitherspent, saved, or taxed away , so it is necessary that: Y = Substituting the second equation into the first equation and rearranging yields: X – M = The fundamental equation shows that an increase in the taxes will cause the budget deficit to , which should the trade deficit.Who receives the greatest benefit from a trade deficit? O Foreign consumers O Domestic farmers exporting agricultural products O Domestic firms in industries with significant imports O Domestic individuals who own stock Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.
- Under which of the following circumstances would it most likely be beneficial for a government to be a large borrower of foreign capital ? A. Never, as there is no economic benefit to a country from running Trade Deficits. B. If the inflow of Capital is absorbed/offset by greater government borrowing. C. When borrowing larger amounts is based on unconventional/heterodox economic viewpoints. D. When those funds are invested in sectors that sustain Economic Growth over time. E. None of the AboveUnder fixed exchange rate system and small open economy, expansionary fiscal policy is effective while restricted trade policy is ineffectiveGraphically explain THE point of view by using Mundell-Fleming model.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.).