MACROECONOMICS >CUSTOM<
20th Edition
ISBN: 9781259877254
Author: McConnell
Publisher: MCG CUSTOM
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Chapter 16.6, Problem 1QQ
To determine
Increase in resource availability.
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Exercise 2
Consider a small open economy.
Assume that GDP (Y) is 5000. Consumption (C) is given by the equation C = 1000 + 0.25(Y-T). Investment (1)
is given by the equation I = 1500 – 50r, where r is the real interest rate in percentage points. The world
interest rate is actually 5% (r*-5). Taxes (T) are 1000 and government spending (G) is 1500. Net exports are
given by the equation NX=500-250E.
1. Compute the equilibrium real exchange rate. Is the Purchasing Power Parity assumption respected?
Suppose that prices in the home currency are ten times smaller than prices in the dominant foreing
currency. Which is the nominal exchange rate?
2. Is the government budget in surplus or deficit? For each of the possible policy tools to achieve a
balanced budget, compute the equilibrium exchange rate and represent it graphically. Interpret
your results.
3. Suppose T and G at their initial values (1000 and 1500). Suppose there is a shift in the global supply
of funds, so that the new world…
Argentina has net capital outflow of $2,000, government purchases of $10,000 and consumption of $40,000. Which of the
following is correct?
If its domestic investment is $2,000, its GDP is $52,000.
If its domestic investment is $4,000, its GDP is $56,000.
If its domestic investment is $10,000, its GDP is $58,000.
None of the above are correct.
b.
d.
A
B
D
b
please quickly thanks !
Chapter 16 Solutions
MACROECONOMICS >CUSTOM<
Ch. 16.1 - Prob. 1QQCh. 16.1 - Prob. 2QQCh. 16.1 - Prob. 3QQCh. 16.1 - Prob. 4QQCh. 16.5 - Prob. 1QQCh. 16.5 - Prob. 2QQCh. 16.5 - Prob. 3QQCh. 16.5 - Prob. 4QQCh. 16.5 - Prob. 1QQCh. 16.5 - Prob. 2QQ
Ch. 16.5 - Prob. 3QQCh. 16.5 - Prob. 4QQCh. 16.6 - Prob. 1QQCh. 16.6 - Prob. 2QQCh. 16.6 - Prob. 3QQCh. 16.6 - Prob. 4QQCh. 16 - Prob. 1DQCh. 16 - Prob. 2DQCh. 16 - Prob. 3DQCh. 16 - Prob. 4DQCh. 16 - Prob. 5DQCh. 16 - Prob. 6DQCh. 16 - Prob. 7DQCh. 16 - Prob. 8DQCh. 16 - Prob. 1RQCh. 16 - Prob. 2RQCh. 16 - Prob. 3RQCh. 16 - Prob. 4RQCh. 16 - Prob. 5RQCh. 16 - Prob. 6RQCh. 16 - Prob. 7RQCh. 16 - Prob. 8RQCh. 16 - Prob. 9RQCh. 16 - Prob. 1PCh. 16 - Prob. 2PCh. 16 - Prob. 3PCh. 16 - Prob. 4PCh. 16 - Prob. 5PCh. 16 - Prob. 6PCh. 16 - Prob. 7P
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- Suppose Country A has a NNP of $480 billion. Income receipts from the rest of the world are $26 billion, income payments to the rest of the world are $10 billion, and depreciation is $45 billion. What is the dollar value of consumption expenditure if it accounts for 68% of GDP? Throughout your calculations, round to one decimal place if necessary. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for surearrow_forward(b) Consider a classical economy. Assume that the GDP of an economy is 9000. Consumption is given by the equation C = 600+(3/4)YD-40r, where r is the percentage real rate of interest. Investment is given by the equation / = 1200- 120r. Net exports is given by NX 1500-200€. There is a budget deficit of 500 and government spending is 1500. Finally, suppose the world interest rate is 5. 1 1 (i) For this open economy derive all equilibrium values, all savings values, and also describe whether the current and capital accounts are in deficit or surplus.arrow_forwardIfthe value of a nation's imports exceeds the value of its exports,which of the following is NOT true? a.Net exports are negative. b.GDP is less than the sum of consumption, investment, and government purchases. c.Domestic investment is greater than national saving. d.The nation is experiencing a net outflow of capitaarrow_forward
- A country has domestic investment of $100 billion. Its citizens purchase $500 of foreign assets and foreign citizens purchase $300 of its assets. What is national saving?Answer1. $600 billion2. $300 billion3. $100 billion4. -$100 billionarrow_forwardHi, i need help with part a and d only. Thanksarrow_forwardMacroeconomics. Question a and b.arrow_forward
- A. By what percentage did GDP decline in 2008? B. At that rate, how much output would have been lost in the $14 trillion economy of 2008?$ Billion C. How much income did this represent for each of the 300 million U.S citizens?arrow_forward51) In the absence of technological progress, we know with certainty that an decrease in the saving rate will cause which of the following? A) decrease steady state consumption B) increase steady state consumption C) have no effect on steady state consumption D) decrease steady state consumption only if the decrease in saving exceeds the increase in depreciation E) decrease steady state consumption only if the decrease in saving is less than the decrease in depreciation 52) As an economy adjusts to an decrease in the saving rate, we would expect output per worker A) to decrease at a constant rate and continue decreasing at that rate in the steady state. B) to decrease at a permanently higher rate. C) to increase at a permanently higher rate. D) to return to its original level. E) none of the above 53) Suppose the following situation exists for an economy: Kt+1/N t/N. Given this information, we know that A) saving per worker equals depreciation per worker…arrow_forwardSuppose Country A has the same GDP as Country B, and that neither nation’s residents own factors of production used by foreign firms, nor do either nation’s firms use factors of production owned by foreign residents. Suppose that relative to Country B, depreciation, indirect business taxes, and personal income taxes in Country A are high, while welfare and Social Security payments to households in Country A are relatively low. Which country has the higher disposable personal income? Why?arrow_forward
- Only questions iv and v to be answered please.arrow_forwardSolve it correctly please. I will rate accordingly.arrow_forward16. Which of the following best describes the concept of foreign direct investment (FDI)? A) Investment made by a company or individual in one country in business interests in another country B) Investment made by the government in domestic industries to promote economic growth C) Investment made by individuals in financial markets within their own country D) Investment made by foreign governments in domestic industries to promote economic developmentarrow_forward
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