Exam 5: Saving and Investment in the Open Economy

In a large open economy,the home country's saving and investment equations are: Sd = 200 + 1400rw and Id = 300 - 400rw. The foreign country's saving and investment equations are: Sd = 50 + 600rw and Id = 75 - 100 rw. Calculate the equilibrium world real interest rate,saving and investment in each country,and the current account balance in each country.

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 ________.

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

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

If business taxes rise in a large open economy,it causes the current account to ________ and saving to ________.

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 capital and financial account balance ________.

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

When there are two large open economies,the world real interest rate will be such that

A large open economy

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.

The current account balance consists of

A friend claims that the United States is a net international debtor.The best way of testing this claim is to see whether

A large open economy has desired national saving of Sd = 1200 + 1000rw,and desired national investment of Id = 1000 - 500rw.The foreign economy has desired national saving of = 1300 + 1000rw,and desired national investment of = 1800 - 500rw.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

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

A large open economy has desired national saving of Sd = 20 + 200rw,and desired national investment of Id = 30 - 200rw.The foreign economy has desired national saving of = 40 + 100rw,and desired national investment of = 75 - 400rw. (a)Calculate the equilibrium values of rw,CA,CAFor,S,I,SFor,and IFor. (b)Suppose Sd rises by 45,so that now Sd = 65 + 200rw.Calculate the equilibrium values of rw,CA,CAFor,S,I,SFor,and IFor. (c)Suppose,with Sd back to Sd = 20 + 200rw,as in part (a),that Id rises by 45,to ?Id = 75 - 200rw.Calculate the equilibrium values of rw,CA,CAFor,S,I,SFor,and IFor.

Suppose output is $1000 billion,government purchases are $200 billion,desired consumption is $700 billion,and desired investment is $150 billion.Net foreign lending would be equal to

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

If a U.S.company imports 10 Toyotas from Japan at $15,000 each,and the Japanese company buys airline tickets on a U.S.airline with the money,how does this affect the U.S.balance of payments accounts?

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

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