Imagine that the U.S. economy finds itself in the following situation: a government budget deficit of
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- A country finds itself in the following situation: a government budget deficit of $700; total domestic savings of $1470, and total domestic physical capital investment of $2100. According to the national saving and investment identity, what is the current account deficit?arrow_forwardAny help with number 4, 5 and 6 pleasearrow_forwardThe following figure shows the Current Account Balance (similar to the Trade Balance) of Japan (black line) and China (red line). During their growth periods (1980s for Japan and 2000s for China), were these countries net savers or borrowers? What are some ways that the governments intervened in the foreign exchange market to keep their BOP from adjusting towards 0? 12.5 10.0 7.5 5.0 2.5 0.0 -5.0 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Source: Organization for Economic Co-operation and Development fred.stlouisfed.org US $, Sum Over Component Sub-periods/10000000O000arrow_forward
- 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.arrow_forwardAnswer questions 18 and 19 based on the following table for a hypothetical country: Exports of goods & services Imports of goods & services Net taxes collected by domestic government Private Saving Gross Domestic Private Investment Net Unilateral transfers paid Personal Consumption Government Purchases Balance on the capital account Statistical Discrepancies 18. The hypothetical country runs a current account A) surplus; $100 B) deficit; $120 C) surplus; $150 D) none of the above 19. The hypothetical country runs a financial account A) surplus; $110 B) deficit; $130 C) surplus; $150. D) none of the above $1000 $1000 $200 $250 $120 $200 $380 $200 $0 $0 of ofarrow_forwardYou have the following annual figures for the New Zealand economy. Investment expenditure $42.5 billion Government savings -$1.7 billion The current account balance is not zero. In fact the current account deficit is $6.0 billion. What is New Zealand's actual private sector savings figure? $____billion (use 1 d.p.).arrow_forward
- Would each of the following transactions be includedin U.S. net exports or in U.S. net capital outflow?Indicate whether it would represent an increase or adecrease in that variable.a. An American buys a Sony TV.b. An American buys a share of Sony stock.c. The Sony pension fund buys a bond from theU.S. Treasury.d. A worker at a Sony plant in Japan buys someGeorgia peaches from an American farmer.arrow_forwardSuppose that during 2004, country A had exports of goods of $50, imports of goods of $60, exports of servicces plus investment income receipts from abroad of $36, and imports of services plus the sending of payments of investment income abroad of $30. In addition, during 2004, country A made $15 of unilateral transfers abroad and received no unilateral transfers from abroad. Given this information, country A's "balance on current account" in 2004 was a. a $19 deficit b. a $10 deficit c. a $4 deficit d. a $6 surplusarrow_forwardImagine 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 trade balance? What will be the trade balance if investment rises by $50 billion, while the budget deficit and national savings remain the same?arrow_forward
- Consider the following data for MILESTONES, a hypothetical economy and nation-state. GDP = 8500 billion Government Purchases 500 billion Government Tax Revenue = 1000 billion Welfare Payments = 200 billion Social Security Payments = 400 billion Medicare Payments 300 billion Interest Payments 200 billion Consumption = 7200 billion Gross Investment 800 billion Net Foreign Factor Income = -500 billion PART A 1. What is the level of national saving(NS) in MILESTONES 2. What is the current account (CA) balance in MILESTONES? 3. Describe the current relationship between saving (NS) and gross investment (GI)?arrow_forwardConsider a world with only two countries (i.e., two large open economies), the home country and the foreign country. In the home country the following relationships hold: { refer to image } a) What is the world equilibrium interest rate? What are the equilibrium values of consumption, national saving, investment, and the current account balance in each country?arrow_forwardInternational Finance and the Exchange Rate - End of Chapter Problem At a family gathering, one of your cousins says, "We spend so much more on imports than other countries spend on our exports. It isn't fair, and we should raise tariffs on imports to reduce how much we buy from other countries." How might you explain to your cousin that current account deficits aren't necessarily a sign of economic troubles to come? Our current account deficits mean we obtain cheaper goods than we could otherwise. Most economists agree that an unequal bilateral trade balance is nothing to worry about. Contrary to common belief, the current account deficit does not suggest that we are living beyond our means. The flip side of the current account deficit is a financial account surplus, which could enhance future growth if the foreign spending it entails is directed toward high-quality investments.arrow_forward
- Principles of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStax