Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Question
Chapter 5, Problem 3NP
a)
To determine
To find:The national saving, investment, current account surplus, net export, desired consumption and absorption.
b)
To determine
To find:The national saving, investment, current account surplus, net export, desired consumption and absorption when the investment rises by 2billion.
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In an open economy, it is impossible to have national saving equal to domestic investment.Answer true, false, or uncertain.
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For an open economy, which of the following expressions represents private saving (S)?investment plus tax revenues less government expenditure plus net exports, I + T – G + NXI + T – G – NXI + G + NXG – T + NX – Inone of the above
Discuss the role of budget surpluses and trade surpluses in national saving and investment
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- A large open economy has desired national saving of Sd = 1200 + 1000rw, and desired national investment of Id = 1000 - 500rw. The foreign economy has desired national saving of = 1300 + 1000rw, and desired national investment of = 1800 - 500rw. Suppose the foreign country's government increases its spending by 300 and private saving does not change. Then in equilibrium, the foreign country has net exports equal to____arrow_forwardWhat is an investment? How is it related to national saving? Write the National Income Accounts identity in a Closed economy and an Open economy.arrow_forwardIn a small open economy, if the budget deficit increases, then which of the following is likely to be accurate? a. If private saving and domestic investment stay the same, then net exports increase. b. If private saving stays the same and net exports increase, then domestic investment decreases. c. If private saving decreases and domestic investment stays the same, then net exports increase. d. If private saving increases and net exports decrease, then domestic investment decreases.arrow_forward
- If at a given real interest rate desired national saving is $115 billion, domestic investment is $60 billion, and net capital outflow is $40 billion, then at that real interest rate in the loanable funds market there is a A. surplus. The real interest rate will fall. B. surplus. The real interest rate will rise. C. shortage. The real interest rate will rise. D. shortage. The real interest rate will fall.arrow_forwardWhat do you understand by the term “closed economy”? For a closed economy show, National savings = National Investmentarrow_forwardA decrease in Social Security payments will decrease consumption spending. decrease investment spending. decrease government spending. decrease export spending.arrow_forward
- If consumption equals $6,200 billion, investment equals $1,200 billion, transfer payments equal $1,500 billion, government purchases equal $2,200 billion exports equal $900 billion imports equal $1,100 billion foreign factor income equals $200 billion Then GDP is equal to: Group of answer choices $11,100 billion $9,600 billion $10,900 billion $9,400 billionarrow_forwardAssume that the gross domestic product is $6,000, personal disposal income is $5,100, the government deficit is $200, consumption is $3,800, and the trade deficit is $100. What is the size of: Private Savingarrow_forwardWhat is the saving and investment equation? If national saving declines what will happen to domestic investment and net foreign investment?arrow_forward
- Suppose that GDP is equal to 1,000, national saving is equal to 200, the current account deficit is equal to 100, and the government budget deficit is equal to 50. Private savings must equal （ ）arrow_forwardThe equilibrium condition for GDP in an open economy is: Y = C + I + G + (X – M) GDP can be eitherspent, saved, or taxed away , so it is necessary that: Y = Substituting the second equation into the first equation and rearranging yields: X – M = The fundamental equation shows that an increase in the taxes will cause the budget deficit to , which should the trade deficit.arrow_forwardA real appreciation means that domestic goods become more expensive relative to foreign goods. Please explain. True or false ?arrow_forward
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