MACROECONOMICS+ACHIEVE 1-TERM AC (LL)
10th Edition
ISBN: 9781319467203
Author: Mankiw
Publisher: MAC HIGHER
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Question
Chapter 14, Problem 1PA
(a)
To determine
(b)
To determine
Aggregate supply curve when desired prices do not depend on aggregate output.
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3. Answer the following questions about external wealth.
a. Home has external wealth of $100 million in period t. In t+1, Home purchases $160
million foreign assets, and Foreign purchases $120 million in Home assets. Assume a
world interest rate of 10% per annum. Compute the "change" in external wealth at t+1 for
Home.
b. A country's external wealth was -$1.5 billion at the end of 2015, and its trade balance
was $750 million in 2016. Assume the world interest rate is 5% per annum. What is the
"value" of a country's external wealth at the end of 2016?
1. The table below shows a country's hypothetical national income and product accounts data.
Category
Consumption (personal consumption expenditures)
Investment (gross private domestic investment)
Government consumption (government expenditures)
Exports
Imports
Net Factor Income from Abroad
Net unilateral transfers
Billions of Dollars
8,000
1,300
2,100
900
1,750
+45
-20
a. Compute the following accounts using the information in the table:
Gross national expenditure (GNE)
. Trade balance (TB)
•
Gross domestic product (GDP)
•
Gross national income (GNI)
.
Gross national disposable income (GNDI)
Current account (CA)
b. Derive the current account identity using the national income identity. Are savings greater
than or smaller than investment in this country? The national income identity is:
GNDIGNE + CA, GNE = C + G + I.
4. Assume that a country produces an output Q of 50 every year. The world interest rate is 10%.
Consumption C is 50 every year, and I = G = 0. There is an unexpected drop in output in year
0, so output falls to 28 and is then expected to return to 50 in every future year. If the country
desires to smooth consumption, how much should it borrow in period 0? What will the new
level of consumption be from then on?
Chapter 14 Solutions
MACROECONOMICS+ACHIEVE 1-TERM AC (LL)
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