Consider the following information. Exports are $600 million and grow to 15% a year over the next two years. Imports are $1,200 and grow 30% a year over the next two years. What is the trade balance at the end of the second year? Explain in general terms what should happen to the economy over the next two years? (assume that nothing else in the economy changes). 2. Consider the following

Consider the following information. Exports are $600 million and grow to 15% a year over the next two years. Imports are $1,200 and grow 30% a year over the next two years. What is the trade balance at the end of the second year? Explain in general terms what should happen to the economy over the next two years? (assume that nothing else in the economy changes). 2. Consider the following

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Open-economy Macroeconomics: Basic Concepts

Section: Chapter Questions

Problem 1PA

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6-Look at a country’s Terms of Trade (T.O.T.). It is assumed that when the T.O.T. value increases the country’s wellbeing goes up, and when the T.O.T. value declines, the country’s wellbeing is reduced. Do you agree??? Explain!!! Among others you stated: “Trade between countries highly depends upon terms of trade. T.O.T. has important effects on the balance of payments or on its economic growth so the T.O.T. is used to measure the wellbeing of the country.” Further down though…you refute your previous statement by saying: “But T.O.T. should not be used to calculate wellbeing as its calculation does not show the volume of export of the country, only shows relative changes between countries….”etc.
17. Exchange rates and U.S. exports: A graphical relationship The following graph shows exports from the United States to Japan. (Note: U.S. exports are measured in yen on this graph, which will enable you to see U.S. exports on the same graph as Japanese exports in a later problem.) EXCHANGE RATE (Dollars per yen) Exports from the U.S. EXPORTS (Yen) Exports from the U.S. ? Referring to the graph, why does the line showing exports from the United States slope upward? The lower the price of the yen in term of dollars, the higher the exports from the United States to Japan. The higher the price of the yen in term of dollars, the higher the exports from Japan to the United States. The higher the price of the yen in term of dollars, the lower the exports from the United States to Japan. The lower the price of the yen in term of dollars, the lower the exports from the United States to Japan. Suppose that the exchange rate goes from $10 per 1,000 yen to $8 per 1,000 yen. On the previous…
The graph depicts the market for oil, with the assumption that the United States can import any amount of oil it chooses at the world free trade price. Adjust the graph to reflect what happens when a 50% import tax is imposed on oil. (graph in the image) Approximately how many million barrels are imported before the tax is imposed? imported oil:_________million barrels Approximately how many million barrels are imported after the tax is imposed? imported oil:________million barrel
3. Exchange rates and U.S. exports: A graphical relationship The following graph shows exports from the United States to Japan. (Note: U.S. exports are measured in yen on this graph, which will enable you to see U.S. exports on the same graph as Japanese exports in a later problem.) [Please see the image] Referring to the graph, why does the line showing exports from the United States slope upward? 1. The lower the price of the yen in term of dollars, the lower the exports from the United States to Japan. 2. The higher the price of the yen in term of dollars, the higher the exports from Japan to the United States. 3. The higher the price of the yen in term of dollars, the lower the exports from the United States to Japan. 4. The lower the price of the yen in term of dollars, the higher the exports from the United States to Japan. Suppose that the exchange rate goes from $10 per 1,000 yen to $8 per 1,000 yen. On the previous graph, adjust the…
Suppose a country has an overall balance of trade so that exports of goods and services equal imports of goods and services. Does that imply that the country has balanced trade with each of its trading partners?
At one point Canadas GDP was 1,800 billion and its exports were 542 billion. What was Canadas export ratio at this time?
Question 10 Consider the following table which shows a hypothetical case of India and the US. Both countries produce only wheat and haircuts. Indian prices are in Rupees (Rs). US prices are in dollars ($). Exchange rate between the US $ and Indian Rs is: $1 - Rs 50. What is the official/market based value of per capita GDP of India in dollars? Per Capita Output of Wheat Haircuts Units Indian Units US Price Produced Price per produced per unit In India unit (Rs) in the US ($) 100 400 100 100 400 10 100 10 O $1400 Ⓒ $280 O $14000 O None of the above or not enough information. Question 11 Consider the question above. What is the PPP adjusted per capita GDP of India in US dollars? O $1400 O $280 O $14000 O None of the above or not enough information.
10 In today's world markets, China tends to rely primarily on exports of () A. agricultural products. B. primary products. C. mineral products. D. manufactured products.
2. Imports and Exports Now we allow for international trade. Use the following information from problem 1: C = 400 + (8/9)*DI I= 300 G= 800 T= (1/2)*Y. Suppose that exports are constant at X = 300. Let imports be a fraction of real income: M = (1/9) * Y. a. Give intuition for why imports M are positively related to national income Y in the equation above. b. Suppose that national income increases by $1. How much will spending on imports increase (the marginal propensity to import) in this case? c. Compute the equilibrium level of national income under international trade. d. Suppose that government spending increases by $120. i) Compute the new equilibrium national income. ii) Based on your numerical answer to (i), calculate the change in national income from a one dollar increase in government spending. iii) Derive the new fiscal multiplier from an increase in government spending using an algebraic equation. Compare to Problem 2.d.(ii). Compare to Problem 1.c.(v). e. Trade…
8. At the end of June 21, the exchange rate between the US Dollar (USD) and the Canadian Dollar (CAD) was 1.2 CAD for 1 USD. Today is about 1.37. What is the likely impact on trade between the US and Canada? (a) Zero, since we do not like Canadian products (b) We should have observed a decline in US NX with Canada (c) We should have observed an increase in US NX with Canada (d) We should have observed NX = 0 with Canada
7. Foreign exchange market The following graph shows the foreign exchange market of the fictional country of Kalai, which uses dollars as its domestic currency. DOLLAR PRICE OF FOREIGN CURRENCY Supply of foreign currency Demand for foreign currency QUANTITY OF FOREIGN CURRENCY ? Suppose the foreign exchange market is in equilibrium. Which of the following statements are correct? Check all that apply. ☐ Exports of goods and services exceed imports. □ Imports plus the outflows of capital equals exports plus the inflow of capital. Imports of goods and services exceed exports. The quantity of foreign currency demanded equals the quantity supplied.
Question 5 [Consider a prosperous open economy such as Singapore. If Singapore’s saving rate (gross domestic saving as a % of GDP) is 25%, while its investment rate (domestic investment as a % of GDP) is 20%, the economy will experience a trade surplus, meaning that receipts from exports exceed expenditure on imports. Your answer: [True/False/Uncertain and explain why]