4-8 4. Are lreland\'s savings greater or smaller than its investment? Table: Hyp

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4-8

4. Are lreland's savings greater or smaller than its investment? Table: Hypothetical Irish National Income and Product Accounts Data Category Consumption (personal consumption expenditures) Investment igross private domestic investment) Government consumption (government expenditures) Exports Imports Foreign income payments to domestic factors Domestic income payments to foreign factors Net unilateral transfers Billions of dollars 1,200 700 200 500 600 100 400 (a) greater (b) smaller (c) the same size (d) not enough information is provided to answer the question 5. Suppose that a Japanese investor buys a Korean stock with cash. For Korea, this counts as a: (a) current account credit, current account debit. (b) financial account debit, financial account credit ECO 362 Summer 2018 (c) capital account debit, capital account credit. (d) financial account debit, current account debi 6. Suppose that an Austrian buys a car from Germany with cash. For Germany, this counts as a: (a) current account credit, financial account debit. b) current account debit, financial account credit. (c) current account debit, capital account credit. (d) current account credit, financial account credit 7. If one nation experiences a gain in its external wealth due to valuation effects only, combined, the other nations in the world will experience (a) an equal gain since all currencies are worth more (b) no change in external wealth (c) an equal decline in external wealth (d) an increase in the interest they earn 8. In 2009, U.S. liabilities were dollar-denominated corporate and official debt for the most part, while US. external assets were mostly equities, bank loans, government debt, and foreign direct investment, denominated in foreign currencies. When the dollar fl in the wake of the financial crisis, what net effect was there on U.S. external wealth? (a) No change oocurred because the change in currency value affects everything equally b) External wealth rose since the value of liabilities was already in dollars and changed little, but assets denominated in foreign currencies increased in value (c) External wealth declined since the dollar fell and US assets were not worth as much (d) External wealth declined since the weak dollar forced the US to default on loans

Explanation / Answer

4) In open economy,

investmnet = Public saving + private saving + capital inflows

where capital inflows = import - export

here capital inflows = 600 - 500 = 100

as capital inflows is positive figure then

PUblic saving + private saving = investment - capital inflows.

It implies that savings is less thana investment here.

option (b) is correct.

5) option d

6) a option

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