MICROECONOMICS W/ CONNECT
21st Edition
ISBN: 9781308196077
Author: McConnell
Publisher: MCG/CREATE
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Chapter 27, Problem 10RQ
To determine
The impact of the continuous trade deficit of the US.
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this question has three questions . What proportion of this country’s total gross capital formation (or investment) can be financed from national savings, and what part must be financed from external resources? What are the various forms these external resources could take? show in graph how the current account got a deficit of 12% GDP and the budget deficit of 3%.
Suppose a country has a large current account deficit (in the vicinity of 12% of GDP). It has a gross capital formation rate of 28% of GDP. The country has an overall budget deficit of 3% of GDP. The share of Household and NPISHs Final Consumption Expenditure is 68% of GDP and that of General Government Final Consumption Expenditure is 12%. What proportion of this country’s total gross capital formation (or investment) can be financed from national savings and what part must be financed from external resources? What are the various forms these external resources could take?
Suppose that Argentina's dollar-denominated external assets and liabilities are $10 billion and $100 billion, respectively, and its Argentine peso-denominated external assets are 70 billion pesos (P) and peso-denominated external liabilities are 50 billion pesos (P). Suppose further that Argentina fixes its exchange rate at P1.5 = $US1.
a) What is the peso value of Argentina's total external wealth? Is it a net debtor or creditor?
b) Suppose that Argentina changes its exchange rate to P2.3 = $US1. How does the external wealth of Argentina change when this occurs?
Assume the value of a country's currency is 1 when the price level is 1.2. Instructions: Enter your answers rounded to 2 decimal places. If you are entering any negative numbers be sure to include a negative sign (−) in front of those numbers. If the price level changes to 1.4, by how much in percentage terms will the value of the country's currency change? percent Now assume that the value of the country's currency is equal to 1 when the price level is 2. If the price level changes to 0.8, by how much will the value of the country's currency change? percent
Chapter 27 Solutions
MICROECONOMICS W/ CONNECT
Ch. 27.1 - Prob. 1QQCh. 27.1 - Prob. 2QQCh. 27.1 - Prob. 3QQCh. 27.1 - Prob. 4QQCh. 27.A - Prob. 1ADQCh. 27.A - Prob. 1ARQCh. 27.A - Prob. 1APCh. 27 - Prob. 1DQCh. 27 - Prob. 2DQCh. 27 - Prob. 3DQ
Ch. 27 - Prob. 4DQCh. 27 - Prob. 5DQCh. 27 - Prob. 6DQCh. 27 - Prob. 7DQCh. 27 - Prob. 8DQCh. 27 - Prob. 9DQCh. 27 - Prob. 10DQCh. 27 - Prob. 11DQCh. 27 - Prob. 1RQCh. 27 - Prob. 2RQCh. 27 - Prob. 3RQCh. 27 - Prob. 4RQCh. 27 - Prob. 5RQCh. 27 - Prob. 6RQCh. 27 - Prob. 7RQCh. 27 - Prob. 8RQCh. 27 - Prob. 9RQCh. 27 - Prob. 10RQCh. 27 - Prob. 1PCh. 27 - Prob. 2PCh. 27 - Prob. 3PCh. 27 - Prob. 4PCh. 27 - Prob. 5P
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- How did large trade deficits hurt the East Asian countries in the mid 1980s? (Recall that trade deficits are equivalent to inflows of financial capital from abroad.)arrow_forwardSuppose that Mexico has previously had restrictions on inflows of foreign direct investment from all sources, including the United States. Then suppose that they remove those restrictions on flows from the United States in a particular industry, say sweatshirts. As a result, several sweatshirt producers in the US move production to Mexico via FDI. Indicate for each of the groups below whether you expect them to gain or to lose from this flow of investment: Owners of firms in Mexico that previously produced sweatshirts. Group of answer choices Lose Gain Unchangedarrow_forwardSuppose that the government of China is currently fixing the exchange rate between the U.S. dollar and the Chinese yuan at a rate of $1 = 6 yuan. Also suppose that at this exchange rate, the people who want to convert dollars to yuan are asking to convert $10 billion per day of dollars into yuan, while the people who are wanting to convert yuan into dollars are asking to convert 36 billion yuan into dollars. What will happen to the size of China’s official reserves of dollars? a. Increase. b. Decrease. c. Stay the same.arrow_forward
- Suppose that Mexico has previously had restrictions on inflows of foreign direct investment from all sources, including the United States. Then suppose that they remove those restrictions on flows from the United States in a particular industry, say sweatshirts. As a result, several sweatshirt producers in the US move production to Mexico via FDI. Indicate for each of the groups below whether you expect them to gain or to lose from this flow of investment: Workers previously employed in sweatshirt production in the US. Group of answer choices Lose Gain Unchangedarrow_forwardSuppose that currency market for Mexican pesos and Canadian dollars is initially in equilibrium, with 10 pesos trading for 1 Canadian dollar. Because of a new trade agreement, there has been a shift in the demand for pesos due to a sudden increase in the capital inflow from Canada to Mexico. What is the effect of the capital inflow on the exchange rate of pesos for Canadian dollars? Explain and show grahically. On your graph, Quantity of Canadian dollars should be on the vertical axis and the Exchange rate (Mexican pesos per Canadian dollar should be on the vertical axis.arrow_forward
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