1. One way to show the flow of funds identity is to write: (G â T) + (I â S) = (M â X)
(a) (i) Imagine (G â T) is positive. Is the government a net lender or a net borrower?
(ii) Imagine (I â S) is negative. Is the private sector a net lender or a net borrower?
(b) In 2012/2013 (the latest year for which we have data) and expressed as a percentage
of GDP, Government net lending was -4%, Household net lending was +4% and
business net lending was -3%.
(i) Just using the information given above was the government running a budget
surplus or deficit? How do you know?
(ii) If we combine households and business together is the private sector a net lender
or a net borrower?
(iii) In that year was Australia borrowing from or lending to the rest of the world? So
from the point of view of the rest of the world is it (the rest of the world) a net lender or
net borrower? What % of our GDP must this have amounted to?
2. (a) What are exchange settlement accounts?
(b) Give two examples of events which might lead to an increase in the size of a
(commercial) bankâs balance in its ESA account.
1. One way to show the flow of funds identity is to write: (G â T) + (I â S) = (M â X)
(a) (i) Imagine (G â T) is positive. Is the government a net lender or a net borrower?
(ii) Imagine (I â S) is negative. Is the private sector a net lender or a net borrower?
(b) In 2012/2013 (the latest year for which we have data) and expressed as a percentage
of GDP, Government net lending was -4%, Household net lending was +4% and
business net lending was -3%.
(i) Just using the information given above was the government running a budget
surplus or deficit? How do you know?
(ii) If we combine households and business together is the private sector a net lender
or a net borrower?
(iii) In that year was Australia borrowing from or lending to the rest of the world? So
from the point of view of the rest of the world is it (the rest of the world) a net lender or
net borrower? What % of our GDP must this have amounted to?
2. (a) What are exchange settlement accounts?
(b) Give two examples of events which might lead to an increase in the size of a
(commercial) bankâs balance in its ESA account.
Related textbook solutions
Related questions
6. To study the macroeconomy we must combined prices and quantities generated in single-product markets into broad aggregates.
| a) | True |
| b) | False |
7. An economist who favored expanded government would recommend:
| a) | tax cuts during recession and tax increases during inflation |
| b) | tax increases during recession and tax cuts during inflation. |
| c) | tax cuts during both recession and inflation |
| d) | increases in government spending during a recession and tax increases during inflation. |
| e) | tax cuts during recessions and reduction in government spending during inflation. |
8. If Government tax revenue exceeds Government spending the result of the budget is
| a) | an increase in investment |
| b) | a shortage |
| c) | an increase in the deficit |
| d) | a decrease in savings |
| e) | a surplus |
9. Which of the following statements is true?
| a) | In the US economy, the net export sector is positive. |
| b) | Aggregate demand is the sum of total output produced by all firms in the US. |
| c) | The aggregate supply curve is vertical if the price level is equal to the per-unit cost of production |
| d) | Aggregate production sums up the four major components C+I+G+Xn in the US economy. |
| e) | Government spending is the largest component of aggregate demand. |
10. Which of the following statements is true?
| a) When unemployment is rising then real GDP is rising. | |
| b) | The required reserve ratio is a tool used by the government to control the demand for money. |
| c) | The four components of aggregate supply are the same as aggregate demand. |
| d) | when an imported resource such as oil has decreased that is an increase in aggregate demand. |
| e) | The four components of aggregate demand---Households, Business, Government, and Net Exports. |
