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The national accounting of country M is reported as follows:

Y (GDP) = 100 (in billions)

C (consumption) = 80

I (domestic investment) = 20

G (government purchase) = 25

T (net taxes) = 10

FA (private capital flow) = +15 (credit)

a) Is the country a net exporter or net importer?

b) How large is the private saving, public saving, and national saving, respectively?

c)How large is the net foreign investment? Is country M a lender or borrower?

d) If country M adopts a fixed exchange rate system, what kind of exchange pressure does its monetary authority face?

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Yusra Anees
Yusra AneesLv10
28 Sep 2019

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Related questions

Suppose the following table shows some national accounting data for a given year for some particular country.

Table 1 national accounting data

Amount (billions of dollars)

Quantity demanded

Consumption of fixed capital

280

Gross private domestic investment

900

Government consumption expenditures

520

Government investment expenditures

200

Imports

580

Exports

680

Household consumption expenditures

3105

Net property income paid overseas

20

 

1.‰What is the country's current account balance? What is the country's gross national saving?

2.‰Explain how net exports affect the economy. Why do national income accountants use net exports to compute GDP, rather than simply adding exports to the other spending components of GDP?

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

1. Which one of the following is not a limitation of GDP?

1) GDP does not include unpaid labor

2) GDP does not value leisure time

3) GDP does not consider environmental degradation

4) GDP does not consider capital depreciation

5) GDP does not account for resource depletion

2. Which one of the following measures is obtained by adjusting GDP?

1) Net Domestic Product

2) Adjusted Net Saving

3) Genuine Progress Indicator

4) Environmental asset accounts

5) Better Life Index

3. Which one of the following national accounting measures does not account for natural

resource depreciation or environmental damage?

1) Environmentally Adjusted Net Domestic Product

2) Genuine Progress Indicator

3) Human Development Index

4) Adjusted Net Saving

5) Environmental asset accounts

4. Which one of the following national accounting measures includes a subtraction for natural capital depreciation?

1) Environmentally Adjusted Net Domestic Product

2) Human Development Index

3) Better Life Index

4) Net Domestic Product

5) Environmental asset accounts

5. A negative value for adjusted net saving implies that ...

1) People in a country are not saving enough for retirement

2) Physical capital is being replaced faster than it is depreciating

3) Natural capital is depreciating faster than it is being replaced

4) Net growth of combined physical and natural capital is negative

5) Both natural capital stocks and physical capital stocks are increasing

6. Which one of the following statements is false?

1) Adjusted Net Saving is negative in some developing countries

2) Increases in natural resource exports will always increase Adjusted Net Saving

3) Gross Domestic Product fails to account for unpaid work

4) Environmentally Adjusted Net Domestic Product subtracts a value for natural capital depletion

5) Net investment is overstated if no adjustment is made for natural capital depletion

7. Which one of the following expenditures would increase the Genuine Progress Indicator?

1) Buying a home air filter

2) The cost of maintaining a prison

3) Cleaning up a toxic waste site

4) The cost of auto accident repairs

5) Providing expanded public education

8. Which of the following national accounting measures adjusts for defensive expenditures, natural resource depletion, and income inequality?

1) Environmentally Adjusted Net Domestic Product

2) Genuine Progress Indicator

3) Human Development Index

4) Adjusted Net Saving

5) Environmental asset accounts

9. Which one of the following measures would we expect to have the highest dollar value for a particular society?

1) Genuine Progress Indicator

2) Net Domestic Product

3) Gross Domestic Product

4) Environmentally Adjusted Net Domestic Product

5) Gross National Saving

10. A measurement of environmental stocks and functions in physical terms is called ...

1) Green accounting

2) Sustainable accounts

3) Ecological values

4) Environmental asset accounts

5) Critical natural capital

11. A factory is an example of what type of capital?

1) Manufactured capital

2) Human capital

3) Natural capital

4) Depreciated capital

5) National capital

12. Which one of the following is the best example of critical natural capital?

1) Diamonds

2) Soil

3) Hydropower

4) Natural gas

5) Willow trees

13. Net Domestic Product is obtained by subtracting what from Gross Domestic Product?

1) Net investment

2) Depreciation of natural capital

3) Net foreign borrowing

4) Depreciation of human capital

5) Depreciation of manufactured capital

14. Environmentally Adjusted Net Domestic Product subtracts which two variables from Gross Domestic Product?

1) Net investment and net foreign borrowing

2) Depreciation of natural and manufactured capital

3) Depreciation of human and manufactured capital

4) Depreciation of manufactured capital and net investment

5) Net investment and depreciation of natural capital

15. Which one of the following measures is not measured in monetary units?

1) Better Life Index

2) Net Domestic Product

3) Genuine Progress Indicator

4) Environmentally Adjusted Net Domestic Product

5) Adjusted Net Saving

16. What are three of the subtractions Adjusted Net Saving makes from gross national saving?

1) Depletion of natural resources, depreciation of human capital, depreciation of fixed capital

2) Depletion of natural resources, defensive expenditures, education expenditures

3) Depletion of natural resources, depreciation of fixed capital, defensive expenditures

4) Depletion of natural resources, depreciation of fixed capital, pollution damages

5) Depletion of natural resources, depreciation of human capital, pollution damages

17. The concept of critical natural capital is most strongly associated with which of the

following measures?

1) Genuine Progress Indicator

2) Environmental asset accounts

3) Net Domestic Product

4) Better Life Index

5) Human Development Index

18. What measure best incorporates the recommendations of the Sarkosy Commission?

1) Genuine Progress Indicator

2) Environmentally Adjusted Net Domestic Product

3) Human Development Index

4) Better Life Index

5) Adjusted Net Saving

19. What does the Adjusted Net Saving measure developed by the World Bank consider

as an integral component of national investment?

1) Education

2) Defensive expenditures

3) Unpaid labor

4) The value of consumer durable goods

5) Health care costs

20. Which one of the following statements offers the best assessment of the current status of environmental accounting measures?

1) Measures such as GNP and GDP should be discarded in favor of the use of environmental asset accounts

2) The Genuine Progress Indicator is the best alternative to GDP

3) The Human Development Index is the best alternative to GDP

4) No universally-accepted alternative for revising national accounting has been developed

5) Environmental services should always be accounted for in monetary terms

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