EBK MINDTAP ECONOMICS FOR BOYES/MELVIN'
10th Edition
ISBN: 9781305387614
Author: MELVIN
Publisher: VST
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Question
Chapter 8, Problem 13E
To determine
To write:
The situation when an increase in aggregate demand causes output level to rise with no change in the
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Students have asked these similar questions
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?
2. Show how each of the following would affect the following US balance of payments: trade
balance (TB), net factor income abroad (NFIA), net unilateral transfers (NUT), financial
account (FA), and capital account (KA). Identify which specific account is affected in each
case (e.g., +$10 in TB). Note that the sum of the balance of payment accounts is zero.
Example:
A California computer manufacturer purchases a $50 hard disk from a Malaysian company,
paying the funds from a bank account in Malaysia.
Answer:
The US imports a hard disk from Malaysia: TB = $50
The US draws a foreign asset to pay for the import (less external asset): FA = +$50.
(Note: The balance of payment identity holds: CA + FA (+KA) = −- $50 + $50 = 0. No KA in
this example.)
a. A US tourist in Japan sells his iPod to a local resident for yen worth $100. (hint: A US
tourist obtains Japanese currency.)
b. A US owner of Honda shares receives $10,000 in dividend payments, which are paid into
a Tokyo bank.
c. The central…
Chapter 8 Solutions
EBK MINDTAP ECONOMICS FOR BOYES/MELVIN'
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