Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Question
Chapter 5, Problem 2AP
To determine
To find: The example which do not affect CA+FA.
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For each of the following transactions that may by themselves change the sum of the Canadian current account balance, CA, and the Canadian capilal
account balance, KA, give an example of an offsetting transaction that would leave CA + KA unchanged.
a. The Canadian government sells military equipment to a foreign govenment. An example of an offsetting transaction is:
O A. Kuwait pays for the services of a Canadian team of oil fire fighters, which is a positive entry in the current account.
O B. Canadian citizens buy cars from the foreign country, which is a negative entry in the current account.
O C. A foreign bank buys Canadian government bonds, which is a negative entry in the capital account.
O D. No transaction needed.
Would each of the following transactions be includedin U.S. net exports or in U.S. net capital outflow?Indicate whether it would represent an increase or adecrease in that variable.a. An American buys a Sony TV.b. An American buys a share of Sony stock.c. The Sony pension fund buys a bond from theU.S. Treasury.d. A worker at a Sony plant in Japan buys someGeorgia peaches from an American farmer.
Suppose you know that exports for a nation are $24 billion and imports are $25 billion,
Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in
front of those numbers.
a. Complete the balance of payments table below using the information above.
Current Account (billions)
Credits
24 $
Financial Account (billions)
Credits
Capital Account (billions)
Credits
Debits
Debits
Debits
$30
$26
$4
$7
b. What is the net balance of each account?
Current account: $[
billion
Financial account: $
billion
Capital account: $
billion
c. What is the sum of all accounts?
%24
billion
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Similar questions
- When considering two countries, if the currency of one country appreciates, then in all cases, the currency of the other country___________?Group of answer choices 1Appreciates. 2What will happen to the currency of the other country is uncertain. 3Gains value. 4Depreciates.arrow_forward1. A. Calculate the current account for U.S. based on the following data for 2018. Export of goods and services $270, Import of goods and services $230, Foreign aids and grants received $120, Foreign aids and grants provided $63, Investment by U.S. companies in foreign countries for establishing subsidiaries $550, Interest and dividend received by U.S $90, investment by foreigners in US companies' bonds and stocks $50. All numbers are in billions of dollars. b. Is U.S. running a deficit or surplus on current account balance, explain in 1 - 2 meaningful sentencesarrow_forwardIn a large open economy, the home country's saving and investment equations are: sd= 200+ 1400r" and Id= 300 – 400r" The foreign country's saving and investment equations are: sd= 50+ 600r" and Id=75- 100r" Calculate the current account balance in the foreign country.arrow_forward
- If a French car costs 10,000 euros, a similar American car costs 15000 dollars, and a euro can buy 1.2 dollars. what is real exchange rates ( you may assume any currency as the “domestic currency”) If a French car costs 10,000 euros, a similar American car costs 15000 dollars, and a euro can buy 1.2 dollars. what is real exchange rates ( you may assume any currency as the “domestic currency”) ???arrow_forwardA government uses an expenditure-reducing measure to correct a balance of payments current account deficit. In the short term, what effect would this measure have on consumer expenditure and net exports? Pick a,b,c, or d A) consumer expenditure: increase & net exports: decrease B) consumer expenditure: decrease & net exports: decrease C) consumer expenditure: decrease & net exports: increase D) consumer expenditure: increase & net exports: increasearrow_forwardConsider the following annual transactions in Canada's current account. If Canadian exports of goods and services are $40 billion, imports of goods and services are $28 billion, net investment income is $5 billion, transfers by Canadians to foreigners are $2 billion and transfers from foreigners to Canadian citizens are $2 billion, then the current account balance (as an integer value) is?arrow_forward
- would each of the following transactions be included in net exports or net capital outflow? Please also tell whether it would represent an increase or a decrease in that variable. i. A Pakistani buys a Sony TV. ii. A Pakistani buys a share of Sony stock. iii. The Sony pension fund buys a bond from Pakistani Treasury. iv. A worker at a Sony plant in Japan buys some mango from a Pakistani farmer.arrow_forwardSuppose that China is a developing country and United States of America is a developed country. In China, based on the recent developments, US Dollar/Yuan exchange rate is increasing, which means US Dollar gaining value. Discuss what is likely to happen to China's current account balance? Why? Discuss using the concepts that is related the balance of payments topic.arrow_forwardWould each of the following transactions be included in net exports or net capital outflow? Be sure to say whether it would represent an increase or a decrease in that variable. A Japanese buys some durians from a Malaysian farmer.arrow_forward
- What is meant by current account deficit and current account surplus? State their significancearrow_forwardThe following table shows four nominal exchange rates expressed in Canadian dollars per unit of the foreign currency for two different quarters (Source: Bank of Canada). The column names are the currency codes. Answer the questions using this table. i. MYR: ii. NOK: Year 2000 iii. PEN: 2010 iv. TWD: O Appreciated Quarter 4 4 O Appreciated O Depreciated O Remained unchanged Appreciated O Indicate whether each currency has appreciated, depreciated, or neither, against the Canadian dollar between the two periods. Appreciated O Depreciated ORemained unchanged MYR Depreciated 0.4015 0.3251 Depreciated NOK O 0.1646 0.1709 Remained unchanged PEN Remained unchanged 0.4339 0.3612 TWD 0.0471 0.0334arrow_forwardThe difference between between exports and imports of goods/services forms the current account of the balance of payment, a positive net export (export greater than import) increases current account. True or False?arrow_forward
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