Exam 5: Saving and Investment in the Open Economy

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

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Question 1

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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.

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Question 2

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(a)U.S.merchandise trade balance and current account rise $2 million,capital and financial account declines by $2 million; Mexican merchandise trade balance and current account decline by 4 million pesos,capital and financial account rises by 4 million pesos.
(b)U.S.merchandise trade balance and current account decline by $200,000,capital and financial account rises by $200,000; Mexican merchandise trade balance and current account rise by 400,000 pesos,capital and financial account declines by 400,000 pesos.
(c)U.S.merchandise trade balance is unchanged,current account balance rises by $600,000,capital and financial account declines by $600,000; Mexican merchandise trade balance is unchanged,current account balance falls by 1.2 million pesos,capital and financial account rises by 1.2 million pesos.
(d)U.S.merchandise trade balance is unchanged,current account balance rises by $25,000,capital and financial account declines by $25,000; Mexican merchandise trade balance is unchanged,current account balance declines by 50,000 pesos,capital and financial account rises by 50,000 pesos.
(e)No change in any accounts in either country.

An economic benefit of capital outflows is that they

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Question 3

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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.capital and financial account .

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Question 4

Suppose output is $35 billion,government purchases are $10 billion,desired consumption is $15 billion,and desired investment is $6 billion.Net foreign lending would be equal to

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Question 5

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

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Question 6

In a saving-investment diagram for a small open economy

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Question 7

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

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Question 8

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

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Question 9

Net exports of goods are known as

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Question 10

Suppose output is $35 billion,government purchases are $10 billion,consumption is $15 billion,and net exports are $4 billion.Assume net factor payments equal 0. (a)Calculate the equilibrium amount of investment.Show your work. (b)Calculate the equilibrium amount of absorption.Show your work. (c)Calculate the equilibrium amount of the capital and financial account balance.Show your work.

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Question 11

In goods market equilibrium in an open economy,

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Question 12

The official settlements balance equals

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Question 13

Consider a small open economy in equilibrium with a current account deficit. (a)Draw a diagram showing this situation. (b)What happens to national saving,investment,and the current account balance in equilibrium if government expenditures rise temporarily? Show this result in your diagram.

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Question 14

Suppose the development of the European Union leads to greater investment in Europe.You'd expect

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Question 15

If the United States sells computers to Russia,and uses the proceeds to buy shares of stock in Russian companies,the U.S.trade balance and the U.S.capital and financial account balance .

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Question 16

Consider a large open economy that has a zero current account balance.What are the effects on the world real interest rate,national saving,investment,and the current account balance in equilibrium if (a)future income rises? (b)business taxes decline? (c)government purchases decline? (d)the future marginal product of capital declines?

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Question 17

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

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Question 18

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

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Question 19

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 .

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Question 20

Showing 1 - 20 of 107

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

An economic benefit of capital outflows is that they

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.capital and financial account .

Suppose output is $35 billion,government purchases are $10 billion,desired consumption is $15 billion,and desired investment is $6 billion.Net foreign lending would be equal to

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

In a saving-investment diagram for a small open economy

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

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

Net exports of goods are known as

In goods market equilibrium in an open economy,

The official settlements balance equals

Consider a small open economy in equilibrium with a current account deficit. (a)Draw a diagram showing this situation. (b)What happens to national saving,investment,and the current account balance in equilibrium if government expenditures rise temporarily? Show this result in your diagram.

Suppose the development of the European Union leads to greater investment in Europe.You'd expect

If the United States sells computers to Russia,and uses the proceeds to buy shares of stock in Russian companies,the U.S.trade balance and the U.S.capital and financial account balance .

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

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

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 .

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Long-Run Economic Growth

The Asset Market, Money, and Prices

Business Cycles

The IS-LM/AD-AS Model

Classical Business Cycle Analysis

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

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Exam 5: Saving and Investment in the Open Economy

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

An economic benefit of capital outflows is that they

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.capital and financial account ________.

Suppose output is $35 billion,government purchases are $10 billion,desired consumption is $15 billion,and desired investment is $6 billion.Net foreign lending would be equal to

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

In a saving-investment diagram for a small open economy

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

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

Net exports of goods are known as

In goods market equilibrium in an open economy,

The official settlements balance equals

Consider a small open economy in equilibrium with a current account deficit. (a)Draw a diagram showing this situation. (b)What happens to national saving,investment,and the current account balance in equilibrium if government expenditures rise temporarily? Show this result in your diagram.

Suppose the development of the European Union leads to greater investment in Europe.You'd expect

If the United States sells computers to Russia,and uses the proceeds to buy shares of stock in Russian companies,the U.S.trade balance ________ and the U.S.capital and financial account balance ________.

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

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

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 ________.

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Long-Run Economic Growth

The Asset Market, Money, and Prices

Business Cycles

The IS-LM/AD-AS Model

Classical Business Cycle Analysis

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

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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.capital and financial account .

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

If the United States sells computers to Russia,and uses the proceeds to buy shares of stock in Russian companies,the U.S.trade balance and the U.S.capital and financial account balance .

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

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 .