Macroeconomics 1st Edition by Dean Karlan,Jonathan Morduch

Exercise 20

Tom is stuck with his friends on an island that uses coconuts for currency, but they recently discovered Wilson's Island nearby. Tom's Island agrees to make only one transaction with Wilson's Island: It sells a fishing boat to Wilson's for 15 coconuts. Answer the following questions, assuming that yearly consumption on Tom's Island equals 500 coconuts, and domestic investments in huts and farm equipment equals 150 coconuts.
a. What are net exports for Tom's Island?
b. What is the total national savings for Tom's Island?
c. Suppose Tom's Island imports a volleyball net from Wilson's Island for 5 coconuts. What is the total national savings now?
d. Now Tom purchases 1 coconut tree on Wilson Island at a cost of 10 coconuts. What is the balance of payments? ( Hint: A coconut tree produces coconuts like a factory produces goods.)