Because of the increased global unrest, citizens in a small open economy are no longer travelling abroad for their holiday. As a consequence, in the long term the net exports of that small open economy will _____ a) increase because the national savings increased as well b) be unchanged because only the demand for net exports has increased c) fall because the national savings fell as well d) be unchanged because only the demand for net exports has decreased
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Because of the increased global unrest, citizens in a small open economy are no longer travelling abroad for their holiday. As a consequence, in the long term the net exports of that small open economy will _____
a) increase because the national savings increased as well
b) be unchanged because only the demand for net exports has increased
c) fall because the national savings fell as well
d) be unchanged because only the demand for net exports has decreased
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- A small open economy, Nevaco's real GDP is $100,000, the MPS is 0.20, and the marginal propensity to consume foreign goods is 0.10. All else being the same, if Nevaco's real GDP decreases by $10,000, then the decrease in its total consumption is the decrease in consumption of goods produced in Nevaco is_______, and the decrease in its trading partners___is_ $8,000; $2,000; imports; $1,000 O $10,000; $8,000; exports; $2,000 O $8,000; $7,000; exports; $1,000 $10,000; $10,000; imports; $1,000The table given below shows the levels of real GDP (Y) and the corresponding levels of consumption (C), planned investment (1I), export (EX), and import (IM) of an open economy. Assume that in this country, the aggregate price level is constant, the interest rate is fixed, and there are no taxes. Table 7 Y C EX IM $0 $100 $520 $420 $480 $20 $1,500 $1,075 $520 $420 $480 $245 $3,000 $2,050 $520 $420 $480 $470 $4,500 $3,025 $520 $420 $480 $695 $6,000 $4,000 $520 $420 $480 $920 $7,500 $4,975 $520 $420 $480 $1,145 Refer to Table 7. What is the equilibrium level of real GDP? $1,500 $3,000 $4.500 14 tv MacBook Air 吕0 888 F3 F4 F5 DD F6 F7 F8 F9 F10 # $ % & 3 4 5 8. E R Y U * 00If the U.S. Dollar appreciates, foreigners will find American goods more expensive because they have to spend less for those goods in USD, meaning with higher prices, the number of U.S. goods being exported will likely drop and leads to a reduction in the Gross Domestic Product (GDP). True or False
- 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____In a small open economy, output (gross domestic product) is $30 billion, government purchases are $6 billion, and net factor payments from abroad are zero. Desired consumption and desired investment are related to the world real interest rate in the following manner: TE World Real Desired Desired National Net Interest Rate Consumption Investment Saving Exports 5% $10 billion $8 billion $ billion $ billion 4% $11 billion $9 billion billion 2$ billion 3% $12 billion $10 billion billion billion 2% $13 billion $11 billion 2$ billion $ billion For each value of the world real interest rate, find the value for national saving and net exports. Calculate net exports as the difference between output and absorption. %24 %24 %24 %24a) Would 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 decrease in that variable. i) An Indian buys a Samsung TV ii) An Indian buys a share of sony stock iii) The sony pension fund buys a bond from the Indian government iv) A worker at a Toyota plant in Japan buys some Nagpur oranges from an Indian farmer
- In a small open economy, output (gross domestic product) is $30 billion, government purchases are $6 billion, and net factor payments from abroad are zero. Desired consumption and desired investment are related to the world real interest rate in the following manner: World Real Desired Interest Rate Consumption 5% $12 billion $ billion TI 4% $13 billion 3% $14 billion $ billion $ billion $ billion 2% $15 billion For each value of the world real interest rate, find the value for national saving and net exports. Calculate net exports as the difference between output and absorption. What is the relationship between net exports and foreign lending? Net exports are foreign lending. Desired Investment $4 billion $5 billion $6 billion $7 billion National Saving Net Exports $ billion $ billion $ billion $ billionStudies indicate that net exports and net capital outflows tend to be equal. 1. Explain why net exports and net capital outflows always tend to be equal. 2. Explain how a change in interest rates can lead to changes in net exports?1. Let C denote the total national consumption (in billions of euro) for a certain country and let I denote the total national income (in billions of euro) for that same country. The consumption function C(I) expresses the relationship between both. For the country we are looking at, this function is given by C = √20+81 with domain I > 10. a. Explain why the domain of C is [10, +∞[. You might want to graph the function and the line C = I with your calculator. b. Find the average rate of change in consumption when the income increases from I = 10 to I = 15. c. Give the economic interpretation of your answer to b. d. Give the graphical interpretation of your answer to b. e. The marginal propensity to consume is the instantaneous rate of change of C with respect to I. Find the marginal propensity to consume of the country for an income of 10 billion euro. f. Give a precise economic interpretation of your answer to e. g. Give the graphical interpretation of your answer to e.
- Discuss the role of budget surpluses and trade surpluses in national saving and investmentWhat is the saving and investment equation? If national saving declines what will happen to domestic investment and net foreign investment?A U.S. mutual fund buys stock issued by a corporation in Colombia. A U.S. grocery store chain builds and manages a new warehouse in Honduras. Which one(s) of these is the foreign direct investment? Which one(s) would be taken into account when computing U.S. net capital outflows?