ECMC61_winter 2011 midterm answer.docx

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Economics for Management Studies
Iris Au

ECMC61 Midterm Answer KeyWinter 2011Question 1 20 pointsPart a 15 points1 point will be subtracted for each incorrect entryABCGross domestic product900075008500Consumption630048756375Investment90015001190Government spending95011251785Current account8500 850Nonreserve portion of financial account 565 85650Official reserve transactions 110 90200Capital account 1751750Part b 5 points 4 pts for explanationChange in a countrys foreign wealth KA KAORTnonresWhen KA is negative this implies the country is a net purchaserimporter of assets its holding of foreign assets ABC in foreign wealth 675175 850 KASince the change in foreign wealth is positive for A and B thus A and B accumulate foreign wealthForeign wealth increases by 675 for A and 175 for B 1 ptNote You should comment on the countrys KA and ORT not just oneBesides you nonresshould show what happens to all three countries not just what happens to one country1ECMC61 Midterm Answer KeyWinter 2011
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