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.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter23: The International Trade And Capital Flows

Section: Chapter Questions

Problem 44P: Imagine that the U.S. economy finds itself in the following situation: a government budget deficit...

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