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4. When the world interest rate is negative a two-period economy can run perpetual trade deficits even if its initial net foreign asset position is negative. 5. When the world interest rate is negative a two-period economy cannot run perpetual current account deficits if its initial net foreign asset position is negative. 6. A country starts 2017 as a net creditor. The interest rate on its net asset position is 10 percent. That year, it runs a current account deficit. It follows that the trade balance in 2017 was also negative.

4. When the world interest rate is negative a two-period economy can run perpetual trade deficits even if its initial net foreign asset position is negative. 5. When the world interest rate is negative a two-period economy cannot run perpetual current account deficits if its initial net foreign asset position is negative. 6. A country starts 2017 as a net creditor. The interest rate on its net asset position is 10 percent. That year, it runs a current account deficit. It follows that the trade balance in 2017 was also negative.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Any help with number 4, 5 and 6 please
Exercise 2.1 Indicate whether the following statements are true, false, or uncertain and explain why. 1. An economy that starts with a positive net international investment position will run a trade balance deficit at some point. 2. A country has been having trade balance deficits for 45 years. Four decades ago, the country was a net creditor, but after so many trade deficits it became a debtor. Clearly, this economy will have to run trade surpluses at some point. 3. A two-period economy runs trade surpluses in both periods. It follows that the current account in period 1 can have either sign (depending on the magnitude of TB1), but the current account in period 2 must be positive. 4. When the world interest rate is negative a two-period economy can run perpetual trade deficits even if its initial net foreign asset position is negative. 5. When the world interest rate is negative a two-period economy cannot run perpetual current account deficits if its initial net foreign asset position is negative. 6. A country starts 2017 as a net creditor. The interest rate on its net asset position is 10 percent. That year, it runs a current account deficit. It follows that the trade balance in 2017 was also negative.
Transcribed Image Text:Exercise 2.1 Indicate whether the following statements are true, false, or uncertain and explain why. 1. An economy that starts with a positive net international investment position will run a trade balance deficit at some point. 2. A country has been having trade balance deficits for 45 years. Four decades ago, the country was a net creditor, but after so many trade deficits it became a debtor. Clearly, this economy will have to run trade surpluses at some point. 3. A two-period economy runs trade surpluses in both periods. It follows that the current account in period 1 can have either sign (depending on the magnitude of TB1), but the current account in period 2 must be positive. 4. When the world interest rate is negative a two-period economy can run perpetual trade deficits even if its initial net foreign asset position is negative. 5. When the world interest rate is negative a two-period economy cannot run perpetual current account deficits if its initial net foreign asset position is negative. 6. A country starts 2017 as a net creditor. The interest rate on its net asset position is 10 percent. That year, it runs a current account deficit. It follows that the trade balance in 2017 was also negative.
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