ECO230Y1 Lecture Notes - Government Debt, Paper Clip, Capital Account

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Published on 26 Apr 2013
School
UTSG
Department
Economics
Course
ECO230Y1
Professor
ECMC93 Assignment 2 (Summer 2012)
1
ECMC93 LEC 01
International Economics
Assignment 1
Due: Wednesday, August 1, 2012, 1:30pm (Lecture)
(Note: Assignments submitted after 1:30pm on August 1st WILL NOT BE accepted under
ANY circumstance.)
Instructions:
You can submit an individual or group assignment.
If you submit a group assignment, there should be no more than FIVE students in your
group and you just have to submit ONE copy.
A title page MUST be attached with your assignment; it MUST include your name(s),
student number(s), and your lecture section(s).
Staple your assignment (Paper clip is not accepted).
A PENALTY OF 10% OF THE TOTAL MARKS WILL BE IMPOSED IF YOU DO
NOT HAVE A TITLE PAGE AND THE REQUIRED INFORMATION or STAPLE
YOUR ASSIGNEMNT.
Label your graph(s); otherwise, marks will be subtracted.
No credit will be given if you do not show your work.
Your answer should be structured in a way such that those know little about economics
will have no difficulty in understanding your argument/answer.
Total marks: 100 points.
Question 1 (20 points) Chapter 10
There are only two countries in the world, ABC and XYZ. ABC has a current account deficit of
$200 billion, and capital account is 0 for both countries.
a) Find ABC’s balance on the financial account. Explain. (2 points)
b) Find XYZ’s current account and financial account balances. Explain. (4 points)
c) If the stock of official reserves in ABC remains unchanged, what is the balance of ABC’s
non-reserve portion of financial account? Does the private sector of ABC borrow or lend
funds in the world financial market? Explain. (4 points)
d) Now, consider what happens in XYZ. Suppose the central banks do not trade with the
private sector, what would happen to the value of XYZ’s currency? Explain. (6 points)
e) (Continued from part (d)) What happens to the stock of official reserves in XYZ? Explain.
(4 points)
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Document Summary

Due: wednesday, august 1, 2012, 1:30pm (lecture) (note: assignments submitted after 1:30pm on august 1st will not be accepted under. You can submit an individual or group assignment. If you submit a group assignment, there should be no more than five students in your group and you just have to submit one copy. A title page must be attached with your assignment; it must include your name(s), student number(s), and your lecture section(s). Staple your assignment (paper clip is not accepted). A penalty of 10% of the total marks will be imposed if you do. Not have a title page and the required information or staple. Label your graph(s); otherwise, marks will be subtracted. No credit will be given if you do not show your work. Your answer should be structured in a way such that those know little about economics will have no difficulty in understanding your argument/answer. There are only two countries in the world, abc and xyz.

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