Exam 5: Saving and Investment in the Open Economy

A small open economy increases its investment demand.This causes the world real interest rate to ________ and the country's current account balance to ________.

Suppose the current account shows debits of $5.3 billion and credits of $4.7 billion.The current account balance is ________,and the financial account balance is ________.

If a Japanese company sells 200 VCRs to a French company and uses the money to buy U.S.government bonds,the Japanese merchandise trade balance ________,and the Japanese financial account balance ________.

If a country has a current account surplus,it also has

When future labor income rises in a large open economy,it causes the current account to ________ and investment to ________.

A large open economy increases its desired saving.This causes the world real interest rate to ________ and the country's current account balance to ________.

An economy is considered a small open economy if it

Suppose output is $35 billion,government purchases are $10 billion,desired consumption is $15 billion,and desired investment is $6 billion.Desired savings is equal to

The balance of payments equals

Consider a small open economy with desired national saving of S^d = 200 + 10,000r^w and desired investment of I^d = 1000 - 5000r^w.If r^w = 0.05,then net exports equal

In a small open economy, S^d = $5 billion + ($100 billion)r^w, I^d = $10 billion - ($50 billion)r^w, Y = $50 billion, G = $3 billion, r^w = .06. (a)Calculate the current account balance. (b)Calculate net exports. (c)Calculate desired consumption. (d)Calculate absorption.

If the Federal Reserve buys $3 billion worth of Japanese yen and sells $5 billion of euros,how does this affect the balance of payments?

The United States became a net debtor because

Suppose output is $440 billion,government purchases are $40 billion,desired consumption is $320 billion,and net exports are $35 billion.Then desired investment equals

For each of the following transactions,explain what happens to the merchandise trade balance,current account balance,and financial account balance in both the United States and Mexico.The exchange rate is 2 Mexican pesos per U.S.dollar. (a)A Mexican firm spends 4 million pesos to buy radiology equipment from a U.S.firm. (b)A U.S.firm buys 20,000 sombreros at 20 pesos each. (c)Mexican computer firms send 200 programmers to universities in the United States,paying tuition and expenses of $3000 each. (d)A Mexican entrepreneur gives 50,000 pesos to the United Way of San Antonio,Texas. (e)Mexican investors buy $10 million worth of 30-year U.S.Treasury bonds.

A country's financial account balance decreases if

Suppose a country has the following balance of payments data. (a)Calculate the current account balance. (b)Calculate the financial account balance. (c)Calculate the trade balance. (d)Calculate net factor payments.

If the Federal Reserve buys $3 billion worth of Japanese yen,$6 billion of euros,and sells $5 billion of British pounds,how does this affect the balance of payments?

When a temporary adverse supply shock hits a large open economy,it causes the current account to ________ and investment to ________.

In a large open economy like the United States,an increased government budget deficit which reduces national saving