INTERNATIONAL MACROECONOMIC AND FINANCE CHOOSE THE OPTIONS FROM HIGLIGHTED BELOW
ID: 1199992 • Letter: I
Question
INTERNATIONAL MACROECONOMIC AND FINANCE
CHOOSE THE OPTIONS FROM HIGLIGHTED BELOW. PLS I WILL APPRECIATE IF THE ANSWER IS BEING EXPLAIN.
1a.Given the textbook’s definitions of variables reflecting components of the national income accounts, government savings equals
Y + CA
T - CA
Y - T - C + CA
T - G
Y - T - G
1b.
The carry trade refers to when one
borrows money in a high interest rate currency and invests the borrowed money a low interest rate currency.
borrows money at high interest rates to buy carriage (i.e. transport) services.
borrows money at low interest rates to buy carriage (i.e. transport) services.
buys or sells carriage (i.e. transport) services.
borrows money in a low interest rate currency and invests the borrowed money a high interest rate currency
1c.
The notation 1.75$/£ means
1.75 dollars per pound, and if the number increases, the dollar appreciates against the pound.
1.75 pounds per dollar, and if the number increases, the dollar depreciates against the pound.
1.75 dollars per pound, and if the number increases, the dollar depreciates against the pound.
1.75 pounds per dollar, and if the number increases, the dollar appreciates against the pound.
1.75 pounds per dollar, and if the number decreases, the dollar appreciates against the pound.
Explanation / Answer
1a) Government savings equal Net Taxes minus government expenditures
where net taxes = taxes - transfer payment
thus government savings = T - G.
1b) A carry trade is a strategy in which an investor borrows money at a low interest rate in order to invest in an asset that is likely to provide a higher return. Thus correct answer is
"borrows money in a low interest rate currency and invests the borrowed money a high interest rate currency".
1c) The notation 1.75$/£ means : 1.75 dollars per pound, and if the number increases, the dollar depreciates against the pound.
As if the number increases more dollar will have to be paid to get same euro which means value of dollar depreciated.
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