ECON 3171 Homework 4 Fall

$1000
$1000
$500
$550
$150
$200
$380
$400
$0

4. From the domestic economys perspective,
A) there is a net international capital inow equal to $50.
B) there is a net international capital outow equal to $100.
C) the net international capital ow 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 accounts
A) 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, then
A) the net international investment position must be positive.
B) the nancial account must be positive.
C) the nancial 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 in
A) the late 1960s.
B) the early 1970s.
C) the early 1980s.
D) the late 1980s.
8. The dierence between GNP and GDP is
A) 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 account
decit must imply that
A) the nancial account is negative.
B) the nancial account is in surplus.
C) exports of goods and services exceed imports of goods and services.
D) unilateral transfers are positive.

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10. Which of the following is NOT true about a domestic economys national income identity: S
+ (T – G) = I + CA
A) If CA is positive, national saving nances 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 decits occur when domestic investment is less than national savings.
B) Loans from abroad add to a countrys 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 countrys GNP exceeds its domestic absorption (= C + I + G), it must be true
that
A) this countrys nancial account is in surplus.
B) this countrys capital account is in surplus.
C) this countrys current account is in surplus.
D) this countrys GNP must be greater than GDP.
13. Given that personal consumption is $100, national saving is $15, net taxes are $10, government
purchases are $8, the countrys GNP is
A) $113.
B) $115.
C) $118.
D) $123.
14. Given that the capital account balance is zero, statistical discrepancy is zero, and the nancial
account balance is $500, it must be true that
A) this country ran a current account surplus of $500.
B) this country has a net international borrowing of $500.
C) this countrys nancial account is in decit
D) this countrys external debt declined.
15. All else equal, an ongoing increase in government budget decits must decrease
A) the current account decit.
B) the nancial account surplus.
C) the capital account surplus.
D) the national saving.