Exam 5: Saving and Investment in the Open Economy

If a French company exports $2 million of machinery to Italy and French tourists spend $2 million at Italian beaches,the French merchandise trade balance ________,and the French financial account balance ________.

A large open economy has desired national saving of S^d = 1200 + 1000r^w,and desired national investment of I^d = 1000 - 500r^w.The foreign economy has desired national saving of = 1300 + 1000r^w,and desired national investment of = 1800 - 500r^w.Suppose the foreign country's government increases its spending by 300 and private saving does not change.Then in equilibrium,the foreign country has net exports equal to

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

If a U.S.firm buys tulips from a Dutch firm and the Dutch firm uses the dollars it gets to buy U.S.stocks,the U.S.trade balance ________ and the U.S.financial account ________.

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

The current account balance consists of

In a two-economy model of the United States and another large economy made up of the rest of the world,if desired saving by the rest of the world declined

If there are no net factor payments from abroad and no unilateral transfers,net exports of $10 billion is the same as

In a small open economy,S^d = 200 + 500r^w and I^d = 300 - 200r^w.If r^w = 0.1,then net exports =

Suppose an economy has output of 2100,government spending of 40,consumption of 1600,and absorption of 1940.Calculate the equilibrium values of investment and net exports.

If there is an increase in the future marginal product of capital in a small open economy,it causes the current account to ________ and saving to ________.

Assume that an increase in Costa Rica's government budget deficit reduced desired national saving by 10 million colon.Assuming Costa rice is a small open economy,you would expect the government's action to

If there's an increase in the future marginal product of capital in a large open economy,it causes the current account to ________ and saving to ________.

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

Total spending by domestic residents,businesses,and governments is called

When there are two large open economies,if desired international lending by the domestic country exceeds desired international borrowing by the foreign country,then

How did the United States become a net debtor in the 1980s? Is our foreign debt a significant problem? Explain.

If a French company sells 1000 gallons of Perrier to a U.S.company at 5 euros per gallon,and uses the money to buy stock in a Spanish cork company,how does this affect the French balance of payments accounts?

Consider a small open economy with desired national saving of S^d = 1000 + 1000r^w and desired investment of I^d = 1000 - 500r^w. Calculate national saving,investment,and the current account balance in equilibrium when the real world interest rate is (a)r^w = 0.025. (b)r^w = 0.05. (c)r^w = 0.0.

If the United States had a financial account deficit of $50 billion,we could say the United States had