In a given year, a country has $150 million more in imports than in exports, has to pay $25 million in interest and $75 million in principal on its foreign debt and it receives $100 million in workers’ remittances. The country’s overall government budget deficit for the year is $27 It also draws $38 million dollars from its reserves and receives $42 million in portfolio investments from foreign investors. It has no other income payments or receipts. Calculate the current account balance for this country in that year

Q20

1) The government's budget deficit increases, and at the same time the trade deficit grows. This will lead to a(n) _____ in the demand and a(n) _____ in the supply of loanable funds in domestic markets. increase; increase decrease; increase decrease; decrease 2) A temporary decrease in government purchases would cause: a rightward shift in the saving curve and a leftward shift in the investment curve. a rightward shift in the saving curve and a rightward shift in the investment curve. no shift in the saving curve, but a leftward shift in the investment curve.

6.6) Which of the following statements about the open-economy IS curve is correct (a) It is steeper than the closed-economy IS curve because net export depends posi- tively on domestic income. (b) It would shift upward when the domestic government relaxes its import quotas. (c) All of the above. (d) None of the above.

Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget.   Real Interest Rate National Saving Domestic Investment Net Capital Outflow (Percent) (Billions of dollars) (Billions of dollars) (Billions of dollars) 7 60 25 -10 6 55 30 -5 5 50 35 0 4 45 40 5 3 40 45 10 2 35 50 15     Given the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market.       On the following graph, plot the relationship between the real…

In periods of rapid U.S. growth, the rapid growth usually adds to large U.S. trade deficits by: O increasing U.S. national income, which increased U.S. imports. O reducing real interest rates in the United States. O increasing U.S. national income, which decreased U.S. exports. O increasing U.S. tax revenues and reducing the Federal budget deficit.

Effects of a government budget deficit Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate National Saving Domestic Investment Net Capital Outflow (Percent) (Billions of dollars) (Billions of dollars) (Billions of dollars) 7 40 30 -20 6 35 35 -15 5 30 40 -10 4 25 45 -5 3 20 50 0 2 15 55 5   Given the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market.   Because of the relationship between net capital outflow and net…

6. Debtors and creditors - Net international investment position Suppose that at the end of 2014, the value of U.S.-owned assets abroad is $15,888 billion, and the value of foreign-owned assets in the United States (which are U.S. liabilities) is $16,953 billion. The net international investment position of the United States in 2014 is $ experiencing debt.) billion. (Hint: Be sure to include a negative sign if the U.S. is Suppose that in 2015, the United States runs a current account surplus of $514 billion. If other factors remained constant, the net international investment position of the United States would during 2015 to $ billion. Suppose that during 2015, the U.S. net external debt decreases by $393 billion from the previous year. Given the current account balance, which of the following can explain this outcome? Check all that apply. U.S.-owned assets held abroad depreciated (lost value). The U.S. current account deficit was greater than the country's net borrowing.…

Assume a government decides to implement a new tax policy, resulting in a smaller budget deficit. Based on the national savings and investment identity, this would result in some combination of      private investment,      private savings, and/or      trade deficit. A-Higher; lower; higher B-Higher; lower; lower C-Lower; higher; higher D-Lower; higher; lower

Summarize the effects of a budget deficit by filling in the following table.Real Interest RateReal Exchange RateTrade BalanceEffects of a Budget Deficit