ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- 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; fallarrow_forwardIn 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.arrow_forwardDiscuss the role of budget surpluses and trade surpluses in national saving and investmentarrow_forward
- Calculate net exports and the amount of net foreign lending for a hypothetical small open economy with saving of $145 billion and domestic investment of $118 billion. net exports: $ billion net foreign lending: $ billionarrow_forwardWhy has it been politically challenging for governments to refocus efforts on new technology, education, and physical capital investment since the 2008-2009 recession? Select the correct answer below. They have focused on short-term recovery, but not enough on the long-term. O They have focused on long-term recovery, but not enough on the short-term. Efforts have instead been directed towards keeping the exchange rate constant. High-income countries do not prioritize the development of new technology, education, or physical capital investments.arrow_forwardBecause of the increased global unrest, citizens in a small open economy are no longer travelling abroad for their holiday. As a consequence, in the long term the net exports of that small open economy will _____ a) increase because the national savings increased as well b) be unchanged because only the demand for net exports has increased c) fall because the national savings fell as well d) be unchanged because only the demand for net exports has decreasedarrow_forward
- Consider a small open economy that takes the world real interest rate as given. Suppose that initially the world real interest rate is less than the country’s autarky real interest rate. Now suppose there is a change in tax policy that leads to an increase in domestic investment demand. Which of the following is TRUE? a. The economy may flip from importing capital to exporting capital b. There is an increase in the quantity of domestic saving c. There is an increase in the real interest rate paid by domestic investors d. None of the other optionsarrow_forwardExplain why a developing country with a fixed exchange rate Explain why a developing country with a fixed exchange rate and foreign exchange controls in place (perfectly immobile capital) may find itself dependent on growth in exports, foreign investment, or foreign aid to attain economic growth. Explain why a developing country with a fixed exchange ratearrow_forwardIn a small open economy, if domestic investment equals $70 billion, domestic private saving equals $40 billion, and government saving equals $30 billion, then the trade balance is: a. -$30 billion b. $0 billion c. $30 billion d. $40 billionarrow_forward
- I am a bit confused on how to identify whether the problems are decreasing/increasing in Net Exports and Net Capital Flowarrow_forwardA large open economy has desired national saving of Sd = 1200 + 1000 rw, and desired national investment of Id = 1000 - 500 rw. The foreign economy has desired national saving of Sdfor = 1300 + 1000 rw, and desired national investment of Idfor= 1800 - 500 rw. The equilibrium world real interest rate equals a. 0.05. b. 0.10. c. 0.15. d. 0.20arrow_forwardSaving-Investment Diagram Real Interest Rate, r(percent Saving Curve Investment Curve DE F GH Desired Saving and Investment (in billions of dollars) Based on the Saving-Investment Diagram, if the world real interest rate is indicated by C, then the difference between values H and D measures the net capital outflow the difference between values H and F measures the trade deficit the difference between values H and D measures the trade deficit the domestic real interest rate is indicated by B none of the abovearrow_forward
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