Question 1

If a county has 25 billion euros of imports,15 billion euros of exports,and sells 20 billion euros of assets to foreigners,how many foreign assets do domestic residents purchase?

Accepted Answer

In order for the balance of payments to balance, the current account balance (exports minus imports) must be equal to the capital and financial account balance (assets sold to foreigners minus assets purchased from foreigners). In this case, the current account balance is -10 billion euros (15-25) and the capital and financial account balance is +20 billion euros (20-0). Therefore, domestic residents must have purchased 10 billion euros of foreign assets (the difference between the two balances).

Question 2

Suppose the world had only two countries and domestic residents of country A purchased $50 billion of assets from country B and country B purchased $30 billion of assets from country A.What would the net capital outflows of both countries be?

Accepted Answer

Net capital outflow for a country is calculated as the difference between its purchase of assets from foreign countries and the purchase of its assets by foreign countries. In this case, country A's net capital outflow would be $50 billion - $30 billion = $20 billion (capital outflow because more assets were purchased by country A from country B than vice versa), and country B's net capital outflow would be $30 billion - $50 billion = -$20 billion (capital inflow because more assets were purchased by country B from country A than vice versa). Therefore, the correct choice is C.

Question 3

In an open economy,gross domestic product equals $1,650 billion,government expenditure equals $250 billion,and savings equals $550 billion.What is consumption expenditure?

Accepted Answer

In an open economy, GDP = C + I + G + NX
where:
C = consumption expenditure
I = investment expenditure
G = government expenditure
NX = net exports

From the given information, we know:
GDP = $1,650 billion
G = $250 billion
S = $550 billion

Since S = Y - C - G, we can rearrange the equation as:
C = Y - S - G
C = $1,650 billion - $550 billion - $250 billion
C = $850 billion

Therefore, the consumption expenditure is $850 billion.

Question 4

A country has net capital outflow of -10 billion euros and domestic investment of 20 billion euros.What is its national saving?

Accepted Answer

By definition, national saving (S) is equal to domestic investment (I) minus net capital outflow (NCO). Therefore, S = I - NCO = 20 billion euros - (-10 billion euros) = 20 billion euros + 10 billion euros = 30 billion euros. However, the question asks for national saving, not net national saving (which takes into account foreign borrowing or lending). Therefore, the answer is simply the domestic investment of 20 billion euros, which represents the amount of saving by domestic households and firms that is being used to finance domestic investment. Thus, the correct answer is B) 10 billion euros.

Question 5

During some year a country had exports of $50 billion,imports of $70 billion,and domestic investment of $100 billion.What was its saving during the year?

Accepted Answer

The answer of During some year a country had exports...

Question 6

Other things the same,a country could move from having a trade deficit to having a trade surplus if either

Accepted Answer

The answer of Other things the same,a country could move...

Question 7

A country has net capital outflow of $20 billion.Which of the following is consistent with this net capital outflow?

Accepted Answer

The answer of A country has net capital outflow of...

Question 8

During some year a country had exports of $30 billion,imports of $40 billion,and domestic investment of $60 billion.What was its saving during the year?

Accepted Answer

Saving = Domestic Investment - (Exports - Imports)
Saving = 60 - (30 - 40)
Saving = 60 - (-10)
Saving = 70 billion
Therefore, the country's saving during the year was $50 billion.

Question 9

A country has $100 million of net exports and $170 million of saving.Net capital outflow is

Accepted Answer

The answer of A country has $100 million of net...

Question 10

In an open economy,gross domestic product equals $1,950 billion,government expenditure equals $280 billion,investment equals $500,and net capital outflow equals $280 billion.What is consumption expenditure?

Accepted Answer

In an open economy, the equation for GDP is: 
GDP = C + I + G + NX 
where NX = exports – imports = net exports 
Given: GDP = $1,950 billion, G = $280 billion, I = $500 billion, and NX = -$280 billion. 
Substituting the values, we get: 
$1,950 billion = C + $500 billion + $280 billion - $280 billion 
$1,950 billion = C + $500 billion 
Therefore, 
C = $1,950 billion - $500 billion 
C = $1,450 billion 
So, consumption expenditure is $890 billion (Option C).

Question 11

A country has $30 billion of domestic investment and net capital outflows of -$20 billion.What is the country's saving?

Accepted Answer

Saving = Domestic investment - Net capital outflows
Saving = $30 billion - (-$20 billion)
Saving = $30 billion + $20 billion
Saving = $10 billion

Question 12

A country has $50 million of domestic investment and net capital outflow of $15 million.What is saving?

Accepted Answer

The answer of A country has $50 million of domestic...

Question 13

If a country were to save more,but its domestic investment remained the same,then which of the following would rise

Accepted Answer

The answer of If a country were to save more,but...

Question 14

A country has $60 million of saving and domestic investment of $40 million.Net exports are

Accepted Answer

The national saving and domestic investment equation is given by:
Saving = Investment + Net exports
Here, we have Saving = $60 million, Investment = $40 million.
Therefore, we can find the value of Net exports as:
Net exports = Saving - Investment
Net exports = $60 million - $40 million
Net exports = $20 million
Hence, the correct answer is A) $20 million.

Question 15

A country has $45 million of domestic investment and net capital outflow of -$60 million.What is its saving?

Accepted Answer

The answer of A country has $45 million of domestic...

Question 16

In an open economy,gross domestic product equals $1,850 billion,consumption expenditure equals $975 billion,government expenditure equals $225 billion,investment equals $500 billion,and net exports equals $150 billion.What is national savings?

Accepted Answer

National savings (S) = Y - C - G, where Y is GDP.
S = 1,850 - 975 - 225 = 650 billion. Therefore, choice C is correct.

Question 17

A country has $1.5 billion dollars of domestic investment and net exports of $2 billion.What is its saving?

Accepted Answer

S = I + NX 
S = $1.5 billion + $2 billion 
S = $3.5 billion

Question 18

During some year a country had exports of $50 billion,imports of $35 billion,and purchased $30 billion of foreign assets.What was the value of domestic assets purchased by foreigners?

Accepted Answer

The balance of payments is the record of all transactions between the residents of one country and the residents of foreign nations. It includes current account transactions (imports and exports of goods and services, and income receipts and payments) and capital account transactions (purchase and sale of assets). 
In this case, the current account balance is:
Current account balance = Exports - Imports = $50 billion - $35 billion = $15 billion
And the capital account balance is:
Capital account balance = Purchased foreign assets - Domestic assets purchased by foreigners = $30 billion - X
Since the balance of payments must balance, the capital account balance must equal the current account balance:
Capital account balance = Current account balance
$30 billion - X = $15 billion
X = $30 billion - $15 billion
X = $15 billion 
Therefore, the value of domestic assets purchased by foreigners is $15 billion.

Question 19

A country has $20 billion of domestic investment and net capital outflow of $10 billion.What is saving?

Accepted Answer

The equation for national saving is: S = I - NCO, where S stands for saving, I stands for domestic investment, and NCO stands for net capital outflow. Plugging in the given values, we get: S = 20 billion - (-10 billion) = 20 billion + 10 billion = 30 billion. Therefore, the answer is B.

Question 20

Other things the same,a country could move from having a trade surplus to having a trade deficit if either

Accepted Answer

When saving falls, people spend more, which increases imports and decreases the trade surplus. Similarly, if domestic investment rises, there will be more demand for imported capital goods and the trade surplus will decrease.

Quiz 31: Open-Economy Macroeconomic Models