Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Question
Chapter 5, Problem 2NP
To determine
To calculate: The relationship between net export and foreign lending. The calculation of the national saving, foreign lending, absorption, and net export.
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You have the following annual figures for the New Zealand economy.
Investment expenditure $40.6 billion Net Exports $3.6 billion Net Foreign Income -$9.5 billion
The current account balance is equal to $____billon (use 1 d.p. and a negative sign if the balance you have calculated is a deficit).
New Zealand domestic savings is equal to $____billon (use 1 d.p.).
Suppose that the government introduces a policy that bans foreign investment in New Zealand. If that happens then (everything else held constant) we would expect to see the current account balance
-rise
-remain the same.
-fall
-become harder to predict
Suppose that along with the above policy, the government also wishes to see investment levels maintained. If that is to occur, what else must be happening in the economy?
- The Government must raise taxes.
- Firms must be offered incentives to invest.
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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: $
billion
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: $
263
Incorrect
net foreign lending: $
27
billion
billion
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