5. Note the following accounting identity for gross national income (GNI): GNI =C+I+G+TB+NFIA Using this expression, show that in a closed economy, gross domestic product (GDP), gross national income (GNI), and gross national expenditures (GNE) are the same. Show that domestic investment is equal to domestic savings. 3. The nation of Pecunia had a current account deficit of $1 billion and a nonreserve financial account surplus of $500 million in 2008. a. What was the balance of payments of Pecunia in that year? What happened to the country's net foreign assets? b. Assume that foreign central banks neither buy nor sell Pecunian assets. How did the Pecunian central bank's foreign reserves change in 2008? How would this official intervention show up in the balance of payments accounts of Pecunia? c. How would your answer to (b) change if you learned that foreign central banks had purchased $600 million of Pecunian assets in 2008? How would these official purchases enter foreign balance of payments accounts?
5. Note the following accounting identity for gross national income (GNI): GNI =C+I+G+TB+NFIA Using this expression, show that in a closed economy, gross domestic product (GDP), gross national income (GNI), and gross national expenditures (GNE) are the same. Show that domestic investment is equal to domestic savings. 3. The nation of Pecunia had a current account deficit of $1 billion and a nonreserve financial account surplus of $500 million in 2008. a. What was the balance of payments of Pecunia in that year? What happened to the country's net foreign assets? b. Assume that foreign central banks neither buy nor sell Pecunian assets. How did the Pecunian central bank's foreign reserves change in 2008? How would this official intervention show up in the balance of payments accounts of Pecunia? c. How would your answer to (b) change if you learned that foreign central banks had purchased $600 million of Pecunian assets in 2008? How would these official purchases enter foreign balance of payments accounts?
Chapter1: Making Economics Decisions
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Transcribed Image Text:5. Note the following accounting identity for gross national income (GNI):
GNI =C+I+G+TB+NFIA
Using this expression, show that in a closed economy, gross domestic product (GDP), gross
national income (GNI), and gross national expenditures (GNE) are the same. Show that
domestic investment is equal to domestic savings.
Transcribed Image Text:3. The nation of Pecunia had a current account deficit of $1 billion and a nonreserve
financial account surplus of $500 million in 2008.
a. What was the balance of payments of Pecunia in that year? What happened to the
country's net foreign assets?
b. Assume that foreign central banks neither buy nor sell Pecunian assets. How did
the Pecunian central bank's foreign reserves change in 2008? How would this official
intervention show up in the balance of payments accounts of Pecunia?
c. How would your answer to (b) change if you learned that foreign central banks had
purchased $600 million of Pecunian assets in 2008? How would these official purchases
enter foreign balance of payments accounts?
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