ECONOMICS PACKAGE (APSU)>CUSTOM<
ECONOMICS PACKAGE (APSU)>CUSTOM<
17th Edition
ISBN: 9781323403891
Author: Hubbard
Publisher: PEARSON C
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Chapter 30, Problem 30.3.5PA
To determine

The effects of globalization of financial markets.

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If the economy enters a recessionary gap, then incomes in the economy decrease, which reduce income tax revenues earned by the government. When the economy enters a recession, unemployment compensation increases due to an increase in jobless claims. In other words, the government budget deficit increases. Begin with the open economy financial market in equilibrium. What will happen to the U.S. savings and net capital inflow function if the U.S. budget deficit increases? What will to the investment function if the U.S. budget deficit increases? What will happen to the real rate of interest if the U.S. budget deficit increases? What will happen to the quantity saved/invested if the U.S. budget deficit increases? Given the change in the level of savings, what would happen to the level of consumption?
Considering the following statements, which one is true that represents a financial outflow from the U.S. economy?   A) Returns paid on U.S. investments in France B) A U.S. citizen investing in foreign assets in Japan C) A Chinese investor buying property in Huntsville, Alabama
Answer the given question...    Assume Country X is a lower risk safe haven country while Country Y is higher risk emerging market country. If global financial conditions suddenly tighten, in which direction if any would you expect global capital to normally flow due to this tightening?    A.) From Country X to Country Y    B.) From Country Y to Country X    C.) No change would be expected
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