Question 1

Does the saving and investment equation imply that a country's national saving must always equal its domestic investment? Explain.

Accepted Answer

The answer of Does the saving and investment equation imply...

Question 2

If CAB = current account balance,I = private sector investment,S = national saving and NX = net exports,then

Accepted Answer

This is the basic equation of national income accounting, which states that the current account balance (CAB) plus private sector investment (I) must equal national saving (S).

Question 3

A federal budget deficit can lead to a(n)

Accepted Answer

When a government runs a budget deficit, it typically has to borrow money by issuing bonds. This increases the supply of bonds in the market, which can lead to a decrease in the demand for those bonds and a decrease in their price. As bond prices fall, interest rates rise, which can make the country's currency more attractive to foreign investors seeking higher returns. This increased demand for the currency can cause it to appreciate, making exports more expensive and less competitive in international markets. As a result, net exports could decline.

Question 4

An increase in net foreign investment is possible through either a decrease in national saving or a decrease in domestic investment.

Accepted Answer

An increase in net foreign investment is possible through an increase in national saving or a decrease in domestic investment, not a decrease in national saving.

Question 5

If net primary income and net secondary income are $0,and a country's purchases of foreign goods and services are $25 billion while its sales of goods and services overseas are $26 billion,it has a

Accepted Answer

The current account is calculated as follows: Current account = Net primary income + Net secondary income + Balance of trade (exports - imports). Since net primary income and net secondary income are given as $0, the current account equals the balance of trade. The country has sold $26 billion worth of goods and services overseas and purchased $25 billion worth of foreign goods and services, resulting in a surplus of $1 billion in its balance of trade (exports > imports). Therefore, the answer is (D) $1 billion surplus in its current account.

Question 6

As Australia's net foreign investment is negative,domestic investment must be greater than national saving.

Accepted Answer

Net foreign investment measures the difference between the amount of domestic investment that is financed with foreign investment and the amount of domestic investment that is financed with domestic savings. If the net foreign investment is negative, it means that more domestic investment is being financed with foreign savings than domestic savings. Therefore, domestic investment must be greater than national saving.

Question 7

Suppose the flow of capital from Japan into Australia begins to slow in the coming year.Show how this would affect the value of the dollar in the market for Australian dollars (with the exchange rate defined as yen per dollar).If this occurs,what is the effect on the balance of trade in goods and services?

Accepted Answer

The answer of Suppose the flow of capital from Japan...

Question 8

If you know that a country's net foreign investment is positive,what does that tell you about the relationship between the country's national saving and private investment?

Accepted Answer

The answer of If you know that a country's net...

Question 9

Since the 1970s,Australia's imports and exports have both grown from approximately ________ of GDP,to approximately ________ of GDP by 2013.

Accepted Answer

The answer of Since the 1970s,Australia's imports and exports have...

Question 10

The current account balance is defined as

Accepted Answer

The current account balance includes the value of exports minus imports (net exports), as well as net primary income (such as wages and profits from investments), and net secondary income (such as foreign aid). Therefore, the correct option is B - the value of net exports + net primary income + net secondary income.

Question 11

According to the saving and investment equation,if net foreign investment falls by $35 million

Accepted Answer

Net foreign investment is equal to national savings minus domestic investment. If net foreign investment falls by $35 million, it means that national savings in excess of domestic investment decreases by $35 million.

Question 12

If S = national saving,I = private investment and NFI = net foreign investments,then

Accepted Answer

The national saving is equal to private investment plus net foreign investments, as the equation S = I + NFI shows. This is because national saving represents the total amount of savings in a country, which can either be invested domestically (private investment) or abroad (net foreign investment).

Question 13

If Australians increase their level of saving,explain how this is demonstrated using the saving and investment equation.

Accepted Answer

The answer of If Australians increase their level of saving,explain...

Question 14

Private saving is equal to

Accepted Answer

Private saving refers to the portion of income that is not spent on consumption or on taxes but is saved by households. Therefore, it is equal to national income minus consumption minus taxes. Option C is the only one that accurately represents this equation.

Question 15

What is the savings and investment equation? If S > I,then what is true of net foreign investment? Explain,using the savings and investment equation.

Accepted Answer

The answer of What is the savings and investment equation?...

Question 16

If the current account balance is negative

Accepted Answer

The answer of If the current account balance is negative
...

Question 17

If a current account deficit increases,and investment levels remain the same,national saving must increase.

Accepted Answer

If a current account deficit increases and investment levels remain the same, national savings does not necessarily have to increase. It could be financed by other sources, such as borrowing from abroad.

Question 18

A federal budget deficit may ________ exchange rates (foreign currency per domestic currency),and ________ the balance of trade for goods and services.

Accepted Answer

A federal budget deficit can lead to a depreciation of the domestic currency (raise exchange rates) and worsen the balance of trade by increasing imports and/or reducing exports (reduce the balance of trade).

Question 19

Explain how a floating exchange rate can cause problems for countries that have a substantial number of foreign loans denominated in United States (US)dollars.How might a fixed exchange rate pegged to the US dollar help the country avoid these problems?

Accepted Answer

The answer of Explain how a floating exchange rate can...

Question 20

If Australia's current account is in deficit,net foreign investment must be negative by the same amount.

Accepted Answer

A current account deficit means that Australia is importing more goods and services than it is exporting, which implies a net outflow of money from the country. To finance this deficit, Australia would need to borrow from foreign countries and attract foreign investment. Therefore, net foreign investment must be negative by the same amount as the current account deficit.

Quiz 19: Comparative Advantage, international Trade, and Exchange Rates

Does the saving and investment equation imply that a country's national saving must always equal its domestic investment? Explain.

If CAB = current account balance,I = private sector investment,S = national saving and NX = net exports,then

A federal budget deficit can lead to a(n)

An increase in net foreign investment is possible through either a decrease in national saving or a decrease in domestic investment.

If net primary income and net secondary income are $0,and a country's purchases of foreign goods and services are $25 billion while its sales of goods and services overseas are $26 billion,it has a

As Australia's net foreign investment is negative,domestic investment must be greater than national saving.

If you know that a country's net foreign investment is positive,what does that tell you about the relationship between the country's national saving and private investment?

Since the 1970s,Australia's imports and exports have both grown from approximately of GDP,to approximately of GDP by 2013.

The current account balance is defined as

According to the saving and investment equation,if net foreign investment falls by $35 million

If S = national saving,I = private investment and NFI = net foreign investments,then

If Australians increase their level of saving,explain how this is demonstrated using the saving and investment equation.

Private saving is equal to

What is the savings and investment equation? If S > I,then what is true of net foreign investment? Explain,using the savings and investment equation.

If the current account balance is negative

If a current account deficit increases,and investment levels remain the same,national saving must increase.

A federal budget deficit may exchange rates (foreign currency per domestic currency) ,and the balance of trade for goods and services.

Explain how a floating exchange rate can cause problems for countries that have a substantial number of foreign loans denominated in United States (US)dollars.How might a fixed exchange rate pegged to the US dollar help the country avoid these problems?

If Australia's current account is in deficit,net foreign investment must be negative by the same amount.

Quiz 19: Comparative Advantage, international Trade, and Exchange Rates

Does the saving and investment equation imply that a country's national saving must always equal its domestic investment? Explain.

If CAB = current account balance,I = private sector investment,S = national saving and NX = net exports,then

A federal budget deficit can lead to a(n)

An increase in net foreign investment is possible through either a decrease in national saving or a decrease in domestic investment.

If net primary income and net secondary income are $0,and a country's purchases of foreign goods and services are $25 billion while its sales of goods and services overseas are $26 billion,it has a

As Australia's net foreign investment is negative,domestic investment must be greater than national saving.

If you know that a country's net foreign investment is positive,what does that tell you about the relationship between the country's national saving and private investment?

Since the 1970s,Australia's imports and exports have both grown from approximately ________ of GDP,to approximately ________ of GDP by 2013.

The current account balance is defined as

According to the saving and investment equation,if net foreign investment falls by $35 million

If S = national saving,I = private investment and NFI = net foreign investments,then

If Australians increase their level of saving,explain how this is demonstrated using the saving and investment equation.

Private saving is equal to

What is the savings and investment equation? If S > I,then what is true of net foreign investment? Explain,using the savings and investment equation.

If the current account balance is negative

If a current account deficit increases,and investment levels remain the same,national saving must increase.

A federal budget deficit may ________ exchange rates (foreign currency per domestic currency) ,and ________ the balance of trade for goods and services.

Explain how a floating exchange rate can cause problems for countries that have a substantial number of foreign loans denominated in United States (US)dollars.How might a fixed exchange rate pegged to the US dollar help the country avoid these problems?

If Australia's current account is in deficit,net foreign investment must be negative by the same amount.

Since the 1970s,Australia's imports and exports have both grown from approximately of GDP,to approximately of GDP by 2013.

A federal budget deficit may exchange rates (foreign currency per domestic currency) ,and the balance of trade for goods and services.