ECON 2000 Chapter Notes - Chapter 5: Exchange Rate, Foreign Portfolio Investment, Foreign Exchange Market

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skybeetle843

10 Dec 2016

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Open economy is an economy in which household"s firms and governments borrow lend and trade internationally. Gdp. economic growth: measuring the openness is to measure the sum of exports and imports relative to, by being open to financial flows, countries increase their opportunities for. Closed economy is an economy in which household"s firms and government do not borrow lend and trade internationally. Current account deficit means consuming more than its current income: if current account is surplus indicates a country is consuming less than its current income. Surplus exists: records the flow of funds into and out of a country, capital outflow from canada when a canadian firm builds a factory in another country. Or when a canadian investor, invests in foreign firms: capital inflow is when foreign firms build in canada or foreign people invest in. Canadian bonds: for ex: if the capital inflow is more than the capital outflow, the financial account has a surplus of the difference.

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Balance of payments: Using the following data for a given year, calculate

Item	Value
The rise in the country's private financial assets abroad	623
Imports of merchandise	782
Investment income, net	-27
Transfers, net	-15
Export of services	504
Rise in foreign private financial assets in the country	580
Exports of merchandise	903
Rise in foreign governments financial assets in the country	224
Imports of services	735
Rise in-country government s financial assets abroad	29

(a) The current account balance.

(b) The financial account balance.

viridianmosquito185

QUESTION 10

Below is a table for the Balance of Payments of Goegania, a prosperous island nation.

Current Account			Financial Account
Exports of Goods	$1,940		Capital Inflow	$661
Imports of Goods	???		Capital Outflow	$347
Trade Balance		???	Financial Account		???
Exports of Services	$569		Capital Account		$0
Imports of Services	???		Statistical Discrepancy		$0
Services Balance		$16	Balance of Payments		???
Income Received on Investments	$704
Income Paid on Investments	$505
Net Income on Investments		???
Net Transfers		$-168
The balance on the Current Account		???

Given this information, what is the value for the imports of goods?

Sometimes this question generates some weird numbers. Remember that you would always add the values in a category to get the total. So the total for the Financial Account is always Capital Inflow + Capital Outflow and the Trade Balance is always Exports + Imports for this table. It's just that sometimes those values being added are negative. If you get a negative answer, you should enter in the negative.

lavendertermite76

80. What is dollarization? What risk does a country eliminate when it dollarizes?

81. When a country is open to free trade, there will be gains to:

	A.	producers in the country that is importing the good.
	B.	producers in the country that is exporting the good.
	C.	all producers of the good in both the importing and the exporting country.
	D.	None of the producers will gain.

82. When the European Central Bank made loans to member countries, it sometimes attached conditions to the loans. What were the MOST common requirements for getting these loans?

83. When the United States has a current account deficit, it must:

	A.	sell more exports to balance the account.
	B.	reduce its net transfers to balance the account.
	C.	be balanced with capital inflows from foreign countries.
	D.	buy bonds from foreign countries to balance the account.

ECON 2000 Chapter Notes - Chapter 5: Exchange Rate, Foreign Portfolio Investment, Foreign Exchange Market

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