Consider a world with only two countries (i.e., two large open economies), the home country and the foreign country. In the home country the following relationships hold: { refer to image } b) Suppose that in the home country the desired investment increases by 100, that is, I^d = 400−100r^w. What is the world equilibrium interest rate? What are the equilibrium values of consumption, national saving, investment, and the current account balance in each country?

Which of the following is an example of U.S. foreign portfolio investment? Select one: a.Erica, a U.S. resident, buys bonds issued by the Swiss government. b.Neither A nor B are examples of U.S. portfolio investment. C.A U.S. legal office opens a branch office in Holland. d.Both A and B are examples of U.S. portfolio investment.

When there are two large open economies in the world, if capital goods become relatively cheaper compared to consumption goods in the foreign country, the world real interest rate will and the home country's current account will fall; rise fall; fall rise; rise rise; fall

Consider the following model of an economy with no international trade, and in which the price level is fixed:                                                                                           C = 40 + (8/9)∙DI                                                                                                    I = 30                                                                                                   G = 30                                                                                        Taxes = (1/8)∙GDP   where C is consumption demand, DI is disposable income, I is planned investment, G is government purchases, and all whole numbers are in billions of dollars.   Determine the equilibrium level of production (GDP) in this economy (show your work), and draw this equilibrium situation on a graph.   Use the multiplier to determine the change in equilibrium GDP that would result from an exogenous 16 billion dollar increase of government purchases. Then determine…

Consider the following equations for a small open economy for both the goods and money markets. Goods Market: C = 2000 + 0.8Yd; T = 1000 + 0.3Y; G = 6000; TR = 1200; I = 4000 + 0.24Y – 100r; M = 3000 + 0.2Y; X = 1500; Money Market: LP = 500 + 0.1Y; LT = 2000 + 0.2Y – 10r; Ls = 1000 – 20r; MS = 40,000; P= 5 a.  Derive both the IS and LM equations for the economy and compute the Equilibrium level of Income and Interest Rate.  Then compute the values of investment demand, speculative demand for money and disposal income.                                                                                                                                                            b.     Suppose the government undertook an expansionary  fiscal policy by increasing government expenditure by 20 percent and cutting lump sum tax by 20%. Clearly demonstrate how this would result in the crowding out phenomena, using the IS – LM model. Also, briefly explain how investment demand and speculative demand…

What are the assumptions in the small open economy.vs closed or largeopen? What would be an example country today?

In an open economy,a change in domestic net foreign asset depends on how much is saved, and on investment,which reduces the domestic net foreign asset. True or False.

Q4. Suppose that Brazil initially has a higher capital rental rate (r) than the United States.   What would be the direction of foreign direct investment (FDI)? Use a world-capital-market graph to show the effects of FDI on the two countries’ rental rates of capital, GDP, and return to labor owners. Identify the net change in world output in the above graph. Discussion: what other effects could FDI cause in the recipient and source countries that are not captured in the model?   Your answer

Consider a world with only two countries (i.e., two large open economies), the home country and the foreign country. Both countries have a zero current account balance initially. When answering the following questions, clearly label the lines and show the changes in the graph provided below. Give an intuitive explanation for the effects in each case. b-What are the effects on the world equilibrium interest rate, national saving, investment, and the current account balance in each country if home expected future marginal productivity of capital increases? c- What are the effects on the world equilibrium interest rate, national saving, investment, and the current account balance in each country if foreign country experiences a temporary adverse supply shock?

Which of the following would not be counted in the U.S. BOP current account? Martha receives a $50 dividend check on stock she owns in business in Germany.   A wealthy Italian purchases numerous antiques in the United States for his villa.   Helen, an American oil engineer, is a paid adviser to Middle Eastern countries in the area of petroleum extraction.   General Motors Corporation owns buildings that are situated in Mexico.   France purchases a new jet fighter aircraft from the Boeing Company in the U.S.