Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 31, Problem 2QCMC
To determine
Exchange rate between Paris and New York.
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In a small open economy, if domestic investment equals $70 billion, domestic private saving equals $40 billion, and government saving equals $30 billion, then the trade balance is:
a. -$30 billion
b. $0 billion
c. $30 billion
d. $40 billion
Suppose that national saving is $1456 billion, investment is $1945 billion, and private saving is $1590 billion. How
much is the current account balance?
A. $221 billion.
B. - $221 billion.
C. $489 billion.
D. - $489 billion.
The value of net exports equals the value of
A. national saving – domestic investment.
B. national saving – net capital outflow.
C. public saving.
D. national saving.
Chapter 31 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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- Discuss the role of budget surpluses and trade surpluses in national saving and investmentarrow_forwardHolding other things constant, an increase in anation’s interest rate reducesa. national saving and domestic investment.b. national saving and the net capital outflow.c. domestic investment and the net capital outflow.d. national saving onlyarrow_forwardWhich of the following would be U.S. foreign direct investment? A. A U.S. canning factory opens a plant in Ecuador. B. A Bolivian bank buys U.S. corporate bonds. C. A Polish company opens a shipbuilding plant in the United States. D. A U.S. bank buys Bolivian corporate bonds.arrow_forward
- A country’s investment is 8, its government spends 10 and raises 9 in taxes, and its current account is -2. Find the country’s private saving. Find the country’s public saving. How much net investment does the country receive from the rest of the world?arrow_forwardInternational financial capital flows into the United States come from: а. income that is not spent in the US. b. savings from the rest of the world. С. the savings of US households. d. the savings of the US government.arrow_forwardSuppose that GDP is equal to 1,000, national saving is equal to 200, the current account deficit is equal to 100, and the government budget deficit is equal to 50. Private savings must equal （ ）arrow_forward
- Which of the following are direct foreign investments, and which are not? Event a. A French company merges with an American company; stockholders in the U.S. company exchange their stock for shares in the French firm. b. The same Saudi businessman buys a New York apartment building. c. A Saudi businessman buys $10 million of IBM stock. Is this a direct foreign investment? d. An Italian firm builds a plant in Russia and manages the plant as a contractor to the Russian government. Yes Yes No Noarrow_forwardConsider 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_forwardprovides some hypothetical data on macroeconomicaccountsforthreecountriesrepresented by A, B, and C and measured in billions of currency units. In Table, private household saving is SH, tax revenue is T, government spending is G, and investment spending is I. a. Calculate the trade balance and the net inflow of foreign saving for each country. b. State whether each one has a trade surplus or deficit (or balanced trade). c. State whether each is a net lender or borrower internationally and explain.arrow_forward
- The Current Account DOES NOT include: a. Portfolio Investment b. Net income investments in other countries c. Payments in connection with foreign trade. d. Interest on loans to other countries.arrow_forwardYou have the following annual figures for the New Zealand economy. Investment expenditure $42.5 billion Government savings -$1.7 billion If the current account balance was equal to zero then private savings must be $____billon (use 1 d.p.).arrow_forwardWhen there are two large open economies in the world, if capital goods become relatively cheaper compared to consumption goods in the foreign country, the foreign country's saving will and the foreign country's investment will fall; rise rise; fall rise; rise fall; fallarrow_forward
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