ECON 3171 Homework 4 Assignment: Ch. 9

| October 3, 2018

PS8 6.6, 6.17, 6.20; PS9 6.53, 6.54, 6.58 and PS10 7.4, 7.6, 7.13, 7.26Homework 4ECON 3171 – 001Fall 2012100 PointsReading Assignment: Ch. 9Due: Monday, October 22 Student Name: __________________Multiple Choice Questions. Mark the correct answer for each of the following question(s):Use the information in the following table to answer questions 1 through 4:Exports of goods & services $1000Imports of goods & services $1000Net change in assets owned abroad $500Net change in foreign owned assets at home $550Unilateral transfers received $150Unilateral transfers paid $200Investment income paid to foreigners $380Investment income received from foreigners $400Balance on the capital account $01. The balance on the current account isA) – $30.B) $0.C) $30.D) $50.2. The balance on the financial account isA) -$50.B) $0.C) $50.D) $100.3. The statistical discrepancy isA) – $20.B) – $5.C) $0.D) $10.4. From the domestic economy’s perspective,A) there is a net international capital inflow equal to $50.B) there is a net international capital outflow equal to $100.C) the net international capital flow is zero.D) its domestic absorption exceeds its GNP by $30.5. If a country runs a current account surplus and national private savings equals domestic investment,then the combined governmental accountsA) must be balanced.B) must be positive.C) must be negative.D) could be either negative or positive, depending on the capital account.6. If all government budgets are balanced, and S is greater than I, thenA) the net international investment position must be positive.B) the financial account must be positive.C) the financial account must be negative.D) the net international investment position must be negative.7. The current account balance of the United States began to deteriorate inA) the late 1960s.B) the early 1970s.C) the early 1980s.D) the late 1980s.8. The difference between GNP and GDP isA) GNP includes income received from abroad and excludes income paid abroad.B) GNP excludes income received from abroad and includes income paid abroad.C) GNP includes exports and imports.D) GNP excludes exports and imports.9. If there is no statistical discrepancy and if there is zero capital account balance, a current accountdeficit must imply thatA) the financial account is negative.B) the financial account is in surplus.C) exports of goods and services exceed imports of goods and services.D) unilateral transfers are positive.210. Which of the following is NOT true about a domestic economy’s national income identity: S+ (T – G) = I + CAA) If CA is positive, national saving finances the purchase of our goods by foreign countries.B) If CA is negative, our national saving exceeds our domestic investment.C) If CA is positive, foreign countries borrow from the domestic economy.D) If CA is negative and large, a country risks foreigners owning a large piece of its assets.11. Which of the following is FALSE?A) Current account deficits occur when domestic investment is less than national savings.B) Loans from abroad add to a country’s stock of external debt and generate debt service.C) All countries have external debt.D) Debt service can become an unsustainable burden that holds back development.12. Whenever a country’s GNP exceeds its domestic absorption (= C + I + G), it must be truethatA) this country’s financial account is in surplus.B) this country’s capital account is in surplus.C) this country’s current account is in surplus.D) this country’s GNP must be greater than GDP.13. Given that personal consumption is $100, national saving is $15, net taxes are $10, governmentpurchases are $8, the country’s GNP isA) $113.B) $115.C) $118.D) $123.14. Given that the capital account balance is zero, statistical discrepancy is zero, and the financialaccount balance is $500, it must be true thatA) this country ran a current account surplus of $500.B) this country has a net international borrowing of $500.C) this country’s financial account is in deficitD) this country’s external debt declined.15. All else equal, an ongoing increase in government budget deficits must decreaseA) the current account deficit.B) the financial account surplus.C) the capital account surplus.D) the national saving.

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