Exam 5: Saving and Investment in the Open Economy

Consider a small open economy with desired national saving of S^d = 200 + 10,000r^w and desired investment of I^d = 1,000 - 5,000r^w.If r^w = 0.05,then net exports equal

Consider a small open economy with desired national saving of S^d = 20 + 200 r^w and desired investment of I^d = 30 - 200r^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. (d)Now suppose something causes desired national saving to increase by 10,so that it is now S^d = 30 + 200r^w.Repeat parts (a),(b),and (c). (e)Suppose,with desired national saving at its original level of S^d = 20 + 200r^w,something causes desired investment to rise by 10,to I^d = 40 - 200 r^w.Repeat parts (a),(b),and (c).

An economy is considered a small open economy if it

In goods market equilibrium in an open economy,

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

When a temporary beneficial supply shock hits a small 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

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.

Consider a small open economy with desired national saving of S^d = 200 + 10,000r^w and desired investment of I^d = 1,000 - 5,000r^w.If r^w = 0.05,then a rise in government spending of 50 with no change in private saving causes net exports to become

Consider a small open economy in equilibrium.What happens to the real interest rate,national saving,investment,and the current account balance in equilibrium in each of the following situations (each taken separately).Explain which curve shifts and why,and show a diagram explaining your results.(You may assume that none of the shocks is large enough to significantly affect labor supply or labor demand significantly.) (a)wealth declines (b)business taxes decline (c)income rises temporarily

The best weather in a decade has given Australia a bumper wheat crop.Australia is a small open economy.Based on this information alone,you would expect that

Real domestic interest rates would increase in a large open economy if

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

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 capital and financial account balance ________.

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

If the United States donates footballs to Japan,how is the transaction recorded on the U.S.balance of payments accounts?

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

A country's capital and financial account balance decreases if

Consider a small open economy with desired national saving of S^d = 200 + 10,000r^w and desired investment of I^d = 1,000 - 5,000r^w.If r^w = 0.05,and output = 5,000,then absorption equals

Consider a large open economy.What are the effects,in equilibrium,on the world real interest rate,domestic national saving,domestic investment,the domestic current account balance,foreign national saving,foreign investment,and the foreign current account balance in each of the following scenarios? Show a diagram to illustrate your results. (a)current income rises in the foreign country (b)the future marginal product of capital rises in the domestic country (c)wealth rises in the foreign country