Q3. Suppose in 2021 the Home country imported $600 million in foreign assets and exported $200 in foreign assets. The rest of the world imported $600 million in Home assets and exported (to Home) $200 million in Home assets. Suppose Home's capital account was zero and valuation effects during the year amount to $50 million in capital gains for Home. a. What was Home's financial account? Explain. b. By how much did Home's net international investment position (net wealth) change during the year? (Hint: Include any capital gains or losses to financial account to get NIIA). c. Which was greater, home's national savings or investment in 2021? Explain.

Q3. Suppose in 2021 the Home country imported $600 million in foreign assets and exported $200 in foreign assets. The rest of the world imported $600 million in Home assets and exported (to Home) $200 million in Home assets. Suppose Home's capital account was zero and valuation effects during the year amount to $50 million in capital gains for Home. a. What was Home's financial account? Explain. b. By how much did Home's net international investment position (net wealth) change during the year? (Hint: Include any capital gains or losses to financial account to get NIIA). c. Which was greater, home's national savings or investment in 2021? Explain.

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 2PA

See similar textbooks

Similar questions

Imagine that the U.S. economy finds itself in the following situation: a government budget deficit of 100 billion, total domestic savings of 1,500 billion, and total domestic physical capital investment of 1,600 billion. According to the national saving and Investment Identity, what will be the current account balance? What will be the current account balance if Investment rises by 50 billion, while the budget deficit and national savings remain the same?
Table 23.7 provides some hypothetical data on macroeconomic accounts for three countries represented by A. B, and C and measured in billions of currency units. In Table 23.7, private household saving is SH, tax revenue is T, government spending is G, and investment spending is Calculate the trade balance and the net inflow of foreign saving for each country. State whether each one has a trade surplus or deficit (or balanced trade). State whether each is a net lender or borrower internationally and explain.
State whether each of the following events Involves a financial flow to the Mexican economy or a financial flow out of the Mexican economy: Mexico Imports sen4ces from Japan Mexico exports goods to Canada U.S. investors receive a return from past financial investments in Mexico
Does a higher rate of return in a nations economy, all other things being equal, affect the exchange rate of its currency? If so, how?
Explain the relationship between a current account deficit or surplus and the flow of funds.
In 2001, the United Kingdoms economy exported goods worth 192 billion and services worth another 77 billion. It imported goods worth 225 billion and services worth Â£66 billion. Receipts of income from abroad were 140 billion while income payments going abroad were 131 billion. Government transfers from the United Kingdom to the rest of the world were 23 billion, while various U.K government agencies received payments of 16 billion from the rest of the world. Calculate the U.K. merchandise trade deficit for 2001. Calculate the current account balance for 2001. Explain how you decided whether payments on foreign investment and government transfers counted on the positive or the negative side of the current account balance for the United Kingdom in 2001.
Use the demand-and-supply of foreign currency graph to determine what would happen to a small, open economy that experienced capital outflows.
What is more important, a countrys current account balance or GDP growth? Why?
A booming economy can attract financial capital inflows, which promote further growth. However, capital can just as easily flow out of the country, leading to economic recession. Is a country whose economy is booming because It decided to stimulate consumer spending more or less likely to experience capital flight than an economy whose boom Is caused by economic investment expenditure?