ECN 220 Study Guide - Midterm Guide: Foreign Direct Investment, Government Budget Balance, Foreign Exchange Market

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turquoiseeel977

17 Oct 2013

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Nominal is not adjusted for anything and is per year. Real gdp is adjusted for the change in monetary value. Current account consist of goods and services, investment income and transfers. The current account balance is the different between total receipts and payments for current account items. If receipts exceed payments there is a surplus. If vice versa there is a deficit on current account. Capital account includes only a few minor transactions. All other transactions involving financial capital are included under the financial account. It is a theory that links a nation"s current account balance and its government budget balance. If foreigners" savings pay for the budget deficit, the current account deficit grows. The budgeting defit could be financed through and increase in the private saving. A decrease in domestic investment (the crowding out effect. A decrease in ca which means an increase in the financial account.

Related Questions

Greece has a GDP of some 200 billion euros, with exports of about 40 billion euros and imports of about 50 billion euros. Assume net unilateral transfers are zero, and the statistical discrepancy in the balance of payments is zero.

Show your calculations and answers after each sub-part to this question:

a. What is Greece's expenditure on the sum of consumption (C), investment (I) and government purchases (G)?

b. What is Greece's current account balance?

c. What is Greece's current account balance as a percentage of GDP?

d. What is Greece's balance on the capital & financial account of the balance of payments?

e. Greece's government sector budget deficit this year is 2.0% of GDP. What is the balance of private sector saving and investment, as a percentage of GDP?

f. Last year Greece's foreign debt was 325 billion euros. Based on your answers to the above questions, what will Greece's foreign debt be this year?

harlequintrout221

Q46. An appreciation of the U. S. dollar would
a. encourage foreigners to invest in the United States
b. discourage foreigners from buying U. S. goods
c. discourage the travel abroad of U. S. citizens
d. encourage foreign travel in the United States

Q47. The financial account of the balance of payments includes the purchase and sale of physical assets but not of financial assets.
a. true
b. false

Q48. Special Drawing Rights are issued by the
a. International Monetary Fund
b. Bretton Woods Organization
c. General Agreement on Tariffs and Trade
d. World Bank

Q49. The balance of payments includes
a. only exports, imports, and service transactions
b. the balance on current account, plus all capital transactions and all official transactions and the statistical discrepancy
c. only the official transactions
d. all goods and services produced in a nation's economy during a given year

Q50. A debit item on the U. S. balance of payments is any transaction that
a. results in a loss by U. S. sellers
b. results in a loss by U. S. buyers
c. makes foreigners use up their holdings of U. S. dollars
d. makes U. S. dollars available to foreigners

1. GDP =

a. GNP + net unilateral transfers.

b. GNP - net unilateral transfers.

c. GNP + balance on secondary income.

d. GNP - net receipts of production factor income coming from the rest of the world.

e. GNP + net receipts of production factor income coming from the rest of the world.

2. The spot exchange rate is the exchange that applies when:

a. you make a transaction today by purchasing one currency with another, executing the exchange of currencies immediately.

b. the volume on the currency market is low, i.e. "spotty", so exchange movements may be rapid with each trade.

c. you agree to make purchase one currency with another but the trading of the currencies happens, say, 3, 6, 9, or 12 months from now.

d. the exchange of currency is not electronic, but instead, you can see, i.e. "spot", the currency.

e. you agree to loan, i.e. "spot", the currency to another.

3. If Sweden's central bank sells US dollars to Swedish commercial banks in return for Swedish crowns, then according to IMF definitions, this transaction should show up in Sweden's

a. current account as a credit and in Sweden's financial account as a debit.

b. nonreserve financial account as a debit and in Sweden's official settlements balance as a credit.

c. capital account as a credit and in Sweden's financial account as a debit.

d. nonreserve financial account as a credit and in Sweden's official settlements balance as a debit.

e. capital account as a debit and in Sweden's financial account as a credit

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ECN 220 Study Guide - Midterm Guide: Foreign Direct Investment, Government Budget Balance, Foreign Exchange Market

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