Macroeconomics (9th Global Edition)
9th Edition
ISBN: 9780134141534
Author: Andrew B. Abel, Ben Bernanke
Publisher: Pearson Global Edition
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Question
Chapter 5, Problem 2NP
To determine
To calculate: The relationship between net export and foreign lending. The calculation of the national saving, foreign lending, absorption, and net export.
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The value of net exports equals the value of
A. national saving – domestic investment.
B. national saving – net capital outflow.
C. public saving.
D. national saving.
A government uses an expenditure-reducing measure to correct a balance of payments current account deficit. In the short term, what effect would this measure have on consumer expenditure and net exports? Pick a,b,c, or d
A) consumer expenditure: increase & net exports: decrease
B) consumer expenditure: decrease & net exports: decrease
C) consumer expenditure: decrease & net exports: increase
D) consumer expenditure: increase & net exports: increase
Consider a small open economy with desired national saving of S^d=1000+1000r^w and desired investment of I^d=1000-500r^w. Calculate national saving, investment and the current account balance in equilibrium when the real world interest rate is:
r^w=0.025
r^w=0.050
r^w=0.000
r^w=1.000
Chapter 5 Solutions
Macroeconomics (9th Global Edition)
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- You have the following annual figures for the New Zealand economy. Investment expenditure $42.5 billion Government savings -$1.7 billion Many politicians and commentators would like to see continued increases in investment and current account surpluses rather than deficits. If these events are to occur, what else must be happening in the economy? 1. The Government must raise the retirement age. 2. Government spending must fall 3. National savings (private and government) must rise 4. New Zealand must restrict foreign ownership of land and other assetsarrow_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_forwardNational savings of a Classical small open economy is 120, Investment is 20, and the net export schedule is: NX = 200 - 50*(real exchange rate). If trade restrictions shift the net export function to NX = 300 - 50*(real exchange rate), in the new situation:arrow_forward
- For the past year, a country has 200 million of exports of goods and services, 160 million of imports of goods and services, 60 million of income received from foreigners, and − 40 million of net unilateral transfers. What is the range of values for income paid to foreigners, so that each of the following would be true? a. The country has a current account surplus. b. The country has a deficit for its goods and services balance. c. The country is a net borrower from the rest of the world.arrow_forwardSavings by households 5 percent Savings by businesses 12 percent Private investment 18 percent Net taxes paid 15 percent Government spending 17 percent Based on the table above, the current account balance is Group of answer choices -3% of GNP +3% of GNP -21% of GNP +21% of GNParrow_forwardHolding national savings constant, does an increase in net capital outflow increase, decrease, or have no effect on a country’s accumulation of domestic capital?arrow_forward
- Suppose in the goods market equilibrium of an open economy, saving is $6 billion, and investment is $8 billion. Assume there is no measurement error. Then capital and financial account balance is equal to:arrow_forwardWould each of the following transactions be included in U.S. net exports or in U.S. Net capital outflow? An American buys a Sony TV.b.An American buys a share of Sony stock.c.The Sony pension fund buys a bond from the U.S. Treasuryd.A worker at a Sony plant in Japan buys some Georgia peaches form an American farmer.arrow_forwardIf the U.S government establishes a investment tax credit rule, this rule subsidizes domestic investment. How does this policy affect national saving, domestic investment, net capital outflow, the interest rate, the exchange rate, and the trade balance? Use this model (In the picture) to answer questionarrow_forward
- A country finds itself in the following situation: a government budget deficit of $700; total domestic savings of $1470, and total domestic physical capital investment of $2100. According to the national saving and investment identity, what is the current account deficit?arrow_forwardWould each of the following transactions be included in net exports or net capital outflow? Be sure to say whether it would represent an increase or a decrease in that variable. A) A Malaysian buys a Sony TV. B) A Malaysian buys a share of Sony stock. C) The Japan pension fund buys a bond from the Malaysian treasury. D) A Japanese buys some durians from a Malaysian farmer.arrow_forwardIf U.S. net exports are negative, then net capital outflow is A. negative, so American assets bought by foreigners are greater than foreign assets bought by Americans. B. positive, so foreign assets bought by Americans are greater than American assets bought by foreigners. C. positive, so American assets bought by foreigners are greater than foreign assets bought by Americans. D. negative, so foreign assets bought by Americans are greater than American assets bought by foreigners.arrow_forward
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