Exam 5: Saving and Investment in the Open Economy

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

Suppose a wealthy Canadian donates $10 million to charities in Mexico.Mexican net exports ________ and the current account balance ________.

A small open economy has a current account balance of zero.A rise in the world real interest rate causes

A small open economy has a current account balance of zero.A rise in its investment demand causes

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

Which of the following would be part of the nation's capital and financial account?

A large country imposes capital controls that prohibit foreign borrowing and lending by domestic residents.The country is currently running a capital and financial account deficit.The imposition of the capital controls will cause

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

If all international factor payment flows are investment income,then net investment income from abroad equals

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

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

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.

For each of the following transactions,explain what happens to the merchandise trade balance,current account balance,and capital 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 $3,000 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.