Reference no: EM133341580
Questions:
1. If foreign investors buy more U.S. stocks and bonds, how would that show up in the current account balance?
2. If the trade deficit of the United States increases, how is the current account balance affected?
3. State whether each of the following events involves a financial flow to the Mexican economy or a financial flow out of the Mexican economy: a. Mexico imports services from Japan b. Mexico exports goods to Canada c. U.S. investors receive a return from past financial investments in Mexico
4. In what way does comparing a country's exports to GDP reflect its degree of globalization?
5. If imports exceed exports, is it a trade deficit or a trade surplus? What about if exports exceed imports?
6. What is included in the current account balance?
7. In recent decades, has the U.S. trade balance usually been in deficit, surplus, or balanced?
8. Does a trade surplus mean an overall inflow of financial capital to an economy, or an overall outflow of financial capital? What about a trade deficit?
9. Occasionally, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Explain why such a statement is economically impossible.
10. If a country is a big exporter, is it more exposed to global financial crises?
11. In 2001, the United Kingdom's economy exported goods worth £192 billion and services worth another £77 billion. It imported goods worth £225 billion and services worth £66 billion. Receipts of income from abroad were £140 billion while income payments going abroad were £131 billion. Government transfers from the United Kingdom to the rest of the world were £23 billion, while various U.K government agencies received payments of £16 billion from the rest of the world.
a. Calculate the U.K. merchandise trade deficit for 2001.
b. Calculate the current account balance for 2001.
c. Explain how you decided whether payments on foreign investment and government transfers counted on the positive or the negative side of the current account balance for the United Kingdom in 2001.
12. Imagine that the U.S. economy finds itself in the following situation: a government budget deficit of $100 billion, total domestic savings of $1,500 billion, and total domestic physical capital investment of $1,600 billion. According to the national saving and investment identity, what will be the current account balance? What will be the current account balance if investment rises by $50 billion, while the budget deficit and national savings remain the same?