Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Chapter 5, Problem 2AP
To determine
To find: The example which do not affect CA+FA.
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Suppose that China is a developing country and United States of America is a developed country.
In China, based on the recent developments,
US Dollar/Yuan exchange rate is increasing, which means US Dollar gaining value. Discuss what is likely to happen to China's current account balance? Why? Discuss using the concepts that is related the balance of payments topic.
Consider the following economy:- Mariginal propensity to save = 0.2 Mariginal propensity to import = 0.2 Investment = $500 Governement spending = $300 Taxes = $ 200 Exports = $400 Autonomous import spending = $100 Given this information, if governemnt spending falls by $50, what is the change in current account balance? A: -$35 B: -$15 C: -$75 D: $35 E - None of the above
Suppose that Country A developing country and Country B is a developed country and Country B's currency a reserve currency.(for example US dollar.)
In developing country, based on the recent developments,
(Country A Exchange Rate / Country B Exchange Rate) is increasing. Discuss what is likely to happen to Country A’s current account balance? Why? Discuss using the concepts that is related the balance of payments topic.
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- Imagine 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_forwardThe GDP for the United States is 18,036 billion and its current account balance is 484 billion. What percent of GDP is the current account balance?arrow_forwardSuppose in an economy if the Trade balances are $80 Invisible balance are $20 find the Current account balance of payment!!!!arrow_forward
- Suppose an economy’s national accounts are GNP = 100, C = 70, I = 40, G = 20 and EX = 20 where GNP is gross national product, C is consumption, I is investment, G is government spending, and EX is exports. Using the national income identity, find the value of imports (IM). What is the current account balance? What is the national savings rate (note: saving rate = S/Y)? What would the government, private, and total savings rate be if the government reduced taxes T = 10 while the other variables remain unchanged?arrow_forwardNow consider a small open economy, assuming domestic output is held constant and the country initially has a current account deficit. Explain the impact of an increase in government spending on the current account using both words and graphs.arrow_forwardA 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?arrow_forward
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