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If the value of a nation's imports exceeds the value of its exports, which of the following is NOT true?

a. Net exports are negative.

b. GDP is less than the sum of consumption, investment, and government purchases.

c. Domestic investment is greater than national saving.

d. The nation is experiencing a net outflow of capital.

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Mahe Alam
Mahe AlamLv10
15 Nov 2020
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Related questions

5. Saving and net flows of capital and goods In a closed economy, saving and investment must be equal, but this is not the case in an open economy. In the following problem, you will explore how saving and investment are connected to the international flow of capital and goods in an economy. Before delving into the relationship between these various components of an economy, you will be asked to recall some relationships between aggregate variables that will be useful in your analysis. Recall the components that make up GDP. National income (Y) equals total expenditure on the economy's output of goods and services. Thus, where C = consumption, I = investment, G = government purchases, X = exports, M = imports, and NX = net exports: Y = Also, national saving is the income of the nation that is left after paying for . Therefore, national saving (S) is defined as: S = Rearranging the previous equation and solving for Y yields Y = . Plugging this into the original equation showing the various components of GDP results in the following relationship: S = This is equivalent to S = , since net exports must equal net capital outflow (NCO, also known as net foreign investment). Now suppose that a country is experiencing balanced trade. Determine the relationships between the entries in the following table, and enter these relationships using the following symbols: > (greater than), < (less than), or = (equal to). Outcomes of Balanced Trade Imports Exports 0 Net Exports Y C+I+G Investment Saving Net Capital Outflow 0

Suppose the following table shows some national accounting data for a given year for some particular country.

Table 1 national accounting data

Amount (billions of dollars)

Quantity demanded

Consumption of fixed capital

280

Gross private domestic investment

900

Government consumption expenditures

520

Government investment expenditures

200

Imports

580

Exports

680

Household consumption expenditures

3105

Net property income paid overseas

20

 

1.‰What is the country's current account balance? What is the country's gross national saving?

2.‰Explain how net exports affect the economy. Why do national income accountants use net exports to compute GDP, rather than simply adding exports to the other spending components of GDP?

Since the United States has negative net foreign​ investment, its

A. net capital flow must be negative.

B. domestic saving must be less than its domestic investment.

C. exports must be greater than its imports.

D. domestic investment must be less than its domestic saving.

Expansionary fiscal policy is less effective in an open economy because

A. increases in the money supply will reduce interest rates and lower the value of the​ dollar, reducing aggregate demand.

B. increases in government spending can increase interest​ rates, which increases the value of the dollar and crowds out net exports.

C. increases in government spending will be partly spent on imported​ goods, which do not benefit the domestic economy.

D. increases in taxes reduce​ consumption, which in turn reduces consumption of imports and increases net exports.

When the Federal reserve uses contractionary monetary policy to reduce​ inflation, it

A. sells treasury securities increasing interest​ rates, leading to a stronger dollar that lowers net exports in an open economy.

B. buys treasury securities decreasing interest​ rates, leading to a weaker dollar that lowers consumption of durables in a closed economy.

C. sells treasury securities decreasing interest​ rates, leading to a stronger dollar that lowers domestic investment in a closed economy.

D. buys treasury securities increasing interest​ rates, leading to a weaker dollar that increases net exports in an open economy.

If a country saves more than it invests​ domestically, then its net foreign investment must be (positive, negative, or zero)?

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