ECO 304L Chapter Notes - Chapter 18: United States Dollar, Foreign Direct Investment, Substitute Good

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viridianraven17

10 May 2017

School

UT-Austin

Department

Economics

Course

ECO 304L

Professor

M O S T A S H A R I, S H A L A H

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Document Summary

Net exports (trade balance): the value of a nation"s exports minus the value of its imports. Y > c + i + g. Y < c + i + g. Y = c + i + g. Tastes of customers for domestic and foreign goods. Prices of goods at home and abroad. Income of consumers at home and abroad. Cost of transporting goods from country to country. Net capital outflow = purchase of foreign assets by domestic residents - purchase of. Positive: domestic residents buying more foreign assets than foreign residents buying domestic assets. Negative: domestic residents buying less foreign assets than foreigners buying domestic assets. Perceived economic and political risks of holding assets abroad. Government policies affecting foreign ownership of domestic assets. Foreign direct investment: owner actively manages investment. Foreign portfolio investment: owner has a more passive role. The rate at which a person can trade the currency of one country for the currency of another.

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

ochreduck773

I'm a bit confused about this question, help would be much appreciated.

The following macroeconomics equation describes an accounting identity (i.e. fact) relating national savings (S) to total investment (I), government spending (G), tax revenue (T), exports (X), and imports (M):

(S-I)= (G-T)+(X-M)

Assume a country has a net-zer trade balance (X-M=0)

A) Suppose a country experiences a government budget deficit, (G>T). What can we infer about the relationship between national savings (S) or investment (I)? Explain which is greater.

B) Now, suppose a country experiences a government budget surplus (G<T). Which is greater, national (S) or investment (I)? Explain.

carminedolphin386

An economy with zero net exports is described below:

C	= 100 + 0.6 (Y 'T)
I ^p	= 70
G	= 120
NX	= 0
T	= 150
The multiplier in this economy is 2.5.

A. Find short-run equilibrium output.

Instruction: Enter your response as an integer value.

Short-run equilibrium output: .

B. Economic recovery abroad increases the demand for the country's exports; as a result, NX rises to 80.

Instruction: Enter your response as an integer value.

Short-run equilibrium output (Click to select)decreases/ increases to ________ .

C. Assume that foreign economies are slowing, reducing the demand for the country's exports so that NX = -80. (A negative value of net exports means that exports are less than imports.)

Instruction: Enter your response as an integer value.

Short-run equilibrium output (Click to select)increases/decreases to ___________ .

D. Which of the following best describes the tendency of recessions and expansions to spread across countries?

1. Lower planned aggregate spending in one nation will reduce the amount of goods it exports abroad, thereby lowering the value of imports for its trading partners, which will reduce its short-term equilibrium output as well.

2. Lower planned aggregate spending abroad means that fewer goods will be exported from a specific nation, leaving more goods available for domestic consumption (C) in that nation, which will increase its short-term equilibrium output.

3. Lower planned aggregate spending abroad will reduce the amount of investment that flows into domestic industries from other countries, thereby reducing domestic short-term equilibrium output.

4. Lower planned aggregate spending in a nation means fewer imports of foreign goods, thereby reducing the short-term equilibrium output of its trading partners through lower net export (NX) values in those nations.

bronzehyena108

ECO 304L Chapter Notes - Chapter 18: United States Dollar, Foreign Direct Investment, Substitute Good

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