Explain how is the activity reflected on balance on current

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Q. Explain how is the activity reflected on the balance on current (BCA) account different from the activity reflected on the capital and financial accounts (BFA)? Why does the sum of the BCA + BFA + changes in official reserves equal zero? (Brief answer needed)

Q. Assume a recessionary gap in which GDP1 = $12T, MPC=.9, and an decrease of the interest rate by 1 point (to 1.25) is assumed to increase investment by $400 B. Please give the exact level of GDP2, and an approximate final full employment GDP3.

Reference no: EM1358523

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