Macroeconomics Plus MyEconLab with Pearson eText (1-semester access)
6th Edition
ISBN: 9780134435046
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 18, Problem 18.4.4PA
Subpart (a):
To determine
The values of government budget surplus and current account surplus.
Subpart (b):
To determine
The values of government budget surplus and current account surplus.
Subpart (c):
To determine
The values of government budget surplus and current account surplus.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Distinguish between a government deficit and trade deficit?
(b) Would you rather live in a nation with a with a high per capita GDP and a low growth
rate, or in a nation with a low per capita GDP and a high growth rate?
(c) Briefly explain the quantity theory of money and how it is related to inflation.
(d) Suppose A&K Sound System is considering building a record studio in Cayman Islands.
(i) Assume that A&K Sound System needs borrow money on the bond market. Why
would an increase in interest rates affect the decision whether to build the studio?
(ii) If A&K Sound System has enough of its funds to finance the new studio without
borrowing, would an increase in interest still affect the decision about whether to
build the studio? Explain your answer.
Assume an economy has a budget surplus of 1,000, private savings of 4,000, and investment of 5,000.
Write out a national saving and investment identity for this economy.
What will be the balance of trade in this economy?
If the budget surplus changes to a budget deficit of 1000, with private saving and investment unchanged, what is the new balance of trade in this economy?
Q-3:
B.
The following graph shows a relationship between saving (S), investment (I) and world interest rate (r*); given that r*> r, where r is domestic interest rate.
Graphically show and interpret the impacts of following policy measures on saving (S), investment (I), and net exports (NX):a) Change in fiscal policy at homeb) Change in fiscal policy abroadc) An increase in investment demand
Chapter 18 Solutions
Macroeconomics Plus MyEconLab with Pearson eText (1-semester access)
Ch. 18 - Prob. 18.1.1RQCh. 18 - Prob. 18.1.2RQCh. 18 - Prob. 18.1.3RQCh. 18 - Prob. 18.1.4PACh. 18 - Prob. 18.1.5PACh. 18 - Prob. 18.1.6PACh. 18 - Prob. 18.1.7PACh. 18 - Prob. 18.1.8PACh. 18 - Prob. 18.1.9PACh. 18 - Prob. 18.1.10PA
Ch. 18 - Prob. 18.2.1RQCh. 18 - Prob. 18.2.2RQCh. 18 - Prob. 18.2.3RQCh. 18 - Prob. 18.2.4RQCh. 18 - Prob. 18.2.5PACh. 18 - Prob. 18.2.6PACh. 18 - Prob. 18.2.7PACh. 18 - Prob. 18.2.8PACh. 18 - Prob. 18.2.9PACh. 18 - Prob. 18.2.10PACh. 18 - Prob. 18.2.11PACh. 18 - Prob. 18.2.12PACh. 18 - Prob. 18.2.13PACh. 18 - Prob. 18.3.1RQCh. 18 - Prob. 18.3.2RQCh. 18 - Prob. 18.3.3RQCh. 18 - Prob. 18.3.4PACh. 18 - Prob. 18.3.5PACh. 18 - Prob. 18.3.6PACh. 18 - Prob. 18.3.7PACh. 18 - Prob. 18.3.8PACh. 18 - Prob. 18.3.9PACh. 18 - Prob. 18.3.10PACh. 18 - Prob. 18.4.1RQCh. 18 - Prob. 18.4.2RQCh. 18 - Prob. 18.4.3RQCh. 18 - Prob. 18.4.4PACh. 18 - Prob. 18.4.5PACh. 18 - Prob. 18.4.6PACh. 18 - Prob. 18.4.7PACh. 18 - Prob. 18.4.8PACh. 18 - Prob. 18.5.1RQCh. 18 - Prob. 18.5.2RQCh. 18 - Prob. 18.5.3RQCh. 18 - Prob. 18.5.4PACh. 18 - Prob. 18.5.5PACh. 18 - Prob. 18.5.6PACh. 18 - Prob. 18.5.7PACh. 18 - Prob. 18.1RDECh. 18 - Prob. 18.2RDECh. 18 - Prob. 18.3RDECh. 18 - Prob. 18.4RDECh. 18 - Prob. 18.5RDE
Knowledge Booster
Similar questions
- Explain briefly whether each of the following would be more likely to lead to a higher level of trade for an economy, or a greater imbalance of trade for an economy. Living In an especially large country Having a domestic investment rate much higher than the domestic savings rate Having many other large economies geographically nearby Having an especially large budget deficit Having countries with a tradition of strong protectionist legislation shutting out importsarrow_forwardExplain the relationship between a current account deficit or surplus and the flow of funds.arrow_forwardWhen is a trade deficit likely to work out well for an economy? When is it likely to work out poorly?arrow_forward
- State whether each of the following events Involves a financial flow to the Mexican economy or a financial flow out of the Mexican economy: Mexico Imports sen4ces from Japan Mexico exports goods to Canada U.S. investors receive a return from past financial investments in Mexicoarrow_forwardImagine that the economy of Germany finds itself in the following situation: the government budget has a surplus of 1 of Germanys GDP; private savings is 20 of GDP; and physical investment is 18 of GDP. Based on the national saving and investment identity, what is the current account balance? If the government budget surplus falls to zero, how will this affect the current account balance?arrow_forwardImagine 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?arrow_forward
- What is the difference between trade deficits and balance of trade?arrow_forwardDoes a trade surplus mean an overall inflow of financial capital to an economy, or an overall outflow of financial capital? What about a trade deficit?arrow_forwardSketch a diagram of how a budget deficit causes a trade deficit. (Hint: Begin with what will happen to the exchange rate when foreigners demand more U.S. government debt.)arrow_forward
- Suppose a country has a fixed exchange rate. FX speculators notice that the country’s government is running large and continuing budget deficits. Briefly explain how this situation may lead speculators to believe that the government will have to devalue the country’s currency in the future. What action would the speculators likely take in anticipation of that event? Would this action make a devaluation more or less likely? Briefly explain. Note: No diagram is needed to answer this question.arrow_forwardSuppose that during 2004, country A had exports of goods of $50, imports of goods of $60, exports of servicces plus investment income receipts from abroad of $36, and imports of services plus the sending of payments of investment income abroad of $30. In addition, during 2004, country A made $15 of unilateral transfers abroad and received no unilateral transfers from abroad. Given this information, country A's "balance on current account" in 2004 was a. a $19 deficit b. a $10 deficit c. a $4 deficit d. a $6 surplusarrow_forwardClearly explain the transmission mechanism of a change in the rate of interest on a country’s Balance of Trade. Assume that you are analyzing this mechanism in the case of a country that has an open economy (trades with the rest of the world) and that the monetary authorities decide to lower the rate of interest ‘r’ to stimulate real output and employment. To begin with, assume that this country is operating at less-than full employment. How does a fall in ‘r’ affect a country that is a net exporter ? What would happen if this country is a net importer ? Finally, how does a fall in ‘r’ affect the rate of inflation, other things being constant ?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStax
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou...EconomicsISBN:9781285165875Author:N. Gregory MankiwPublisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Macroeconomics (MindTap Course List)EconomicsISBN:9781285165912Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Economics 2e
Economics
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:OpenStax
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou...
Economics
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...
Economics
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:9781285165912
Author:N. Gregory Mankiw
Publisher:Cengage Learning