.  The government has proposed Rs1,289 billion for the defence budget for the year 2020-21, 5.1% more compared to last year’s revised defence estimates of Rs1,227 billion for the year 2019-20. If Government cut defence Budget, what happens to saving, investment, the trade balance, the interest rate, inflation rate and the exchange rate? And similarly, Government decreases the interest rate due to COVID-19 so explain what impact on consumption, investment and interest rate. Justify the answer with your own word and examples.

Which of the following countries would you expect to have intertemporal produc- tion possibilities biased toward current consumption goods, and which would be biased toward future consumption goods? a. A country like Egypt that has discovered large reserves of natural gas that can be exploited with massive investments. CHAPTER 6 · The Standard Trade Model 175 b. A country like India that is catching up technologically due to massive out- sourcing services, especially from wealthy countries. c. A country like Germany or the United States where a ban on immigration means a limited inflow of immigrants. d. A country like Indonesia that started developing its infrastructure to make industries more productive and cost-efficient. e. A country like the Netherlands that aims to reduce with low investment in the use of biofuels. energy and gas consumption

QUESTION 48 The equilibrium level of income in an open economy is where: B. Consumption + Savings = Imports + Exports. C. Savings + Exports = Investment + Exports. D. Savings + Imports = Investment + Exports.

2. The current account of the balance of payments is calculated as: a. the sum of imports, exports, and transfers. b. the sum of national income and national expenditure. c. the sum of the trade balance, net factor income from abroad, and net unilateral transfers. d. the difference between GDP and GNE.

provides some hypothetical data on macroeconomicaccountsforthreecountriesrepresented by A, B, and C and measured in billions of currency units. In Table, private household saving is SH, tax revenue is T, government spending is G, and investment spending is I. a. Calculate the trade balance and the net inflow of foreign saving for each country. b. State whether each one has a trade surplus or deficit (or balanced trade). c. State whether each is a net lender or borrower internationally and explain.

Based on the table below, which of the following is likely to be true? a. From the first period to the second, the U.S. is using an increasing current account surplus to finance consumption. b. From the first period to the second, the U.S. is using an increasing financial account surplus to finance the larger budget deficit. c. From the first period to the second, public saving is increasing. d. From the first period to the second, the U.S. financial account deficit is increasing.

13. Draw a diagram and illustrate the effects of the follow- ing on the net exports function for the United States: a. The French government imposes restrictions on French imports of U.S. goods. ate my. b. The U.S. national income rises. c. Foreign income falls. d. The dollar depreciates on the foreign exchange market. 60 00 C functiom different. how transcribed image text

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Suppose that the government decides to cut spending. In a three graphs diagram, show theimpact of this policy on real interest rate, national saving, investment, net capital outflows,demand for currency (NX), and supply of currency? Will the currency appreciate ordepreciate?

9. Consider savings-investment diagrams assuming that there are two countries in the world, A and B. Initially, both countries are identical, i.e., they have the same supply of savings and demand for investment. Therefore, even as open economies, they both have balanced current accounts, i.e., neither has a deficit or surplus. Now assume that in country A, the government increases the budget deficit, shifting the supply of savings to the left. If all other curves (A s investment demand, B s savings supply, B s investment demand) stay the same, what will the effect of the increase in A's budget deficit? a. Country B will have a CA surplus. b. Country A will have a KFA deficit. c. Investment in country B will increase. d. The world real interest rate will fall.