ECON 295 Chapter Notes - Chapter 35: Canadian Dollar, Gdp Deflator, Purchasing Power Parity

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5 Dec 2017

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Chapter 35: exchange rates and the balance of payments. The current account: records payments & receipts arising from international trade in goods & servs, trade account, capital-service account, debit item payment of money from canada, credit item receipt of money for canada. The capital account: records payments & receipts arising from trade in lt & st assets, foreign direct investment (fdi, portfolio investment, debit item purchase of assets by canada, credit item sale of assets by canada. The balance of payments must balance: let ca be the current account, & ka be the capital account balance: Includes purchases of foreign currency by the government or central bank (cid:2158)(cid:2194)(cid:2196)(cid:2187) (cid:2197)(cid:2188) (cid:2195)(cid:2187)(cid:2196)(cid:2202)(cid:2201)=(cid:2159)(cid:2157)+(cid:2157): consider a ca surplus: The extra earnings must be used to acquire foreign assets. Ka deficit (capital outflow: consider a ca deficit: The extra purchases can only be financed if we sell assets to foreigners.

Related Questions

Greece has a GDP of some 200 billion euros, with exports of about 40 billion euros and imports of about 50 billion euros. Assume net unilateral transfers are zero, and the statistical discrepancy in the balance of payments is zero.

Show your calculations and answers after each sub-part to this question:

a. What is Greece's expenditure on the sum of consumption (C), investment (I) and government purchases (G)?

b. What is Greece's current account balance?

c. What is Greece's current account balance as a percentage of GDP?

d. What is Greece's balance on the capital & financial account of the balance of payments?

e. Greece's government sector budget deficit this year is 2.0% of GDP. What is the balance of private sector saving and investment, as a percentage of GDP?

f. Last year Greece's foreign debt was 325 billion euros. Based on your answers to the above questions, what will Greece's foreign debt be this year?

harlequintrout221

1. Which of the following trading partners of the United States became its number one "trade problem" at the beginning of the 21^st century?

United Kingdom

Japan

Germany

Canada

China

2. Which of the following presents the correct picture of the outcome of increased world trade after the 1950s, contrary to Servan-Schreiber's prediction?

Third World countries have been excluded from this economic growth leading to stark imbalances in wealth.

The European Union has become the center of world trade, taking the position away from the United States.

The United States has continuously maintained the positive balance of trade it attained during the 1950s.

Economic power and potential has become more evenly distributed among the countries of the world.

SDRs and gold have lost their utility as the basic medium of financial exchange and most monetary statistics have started relating to the U.S. dollar.

3. The _____ of the balance-of-payments statement is most likely to record all merchandise exports, imports, and services plus unilateral transfers of funds.

current account

capital account

credit account

receivables account

reserves account

4. The Foreign Corrupt Practices Act (FCPA) was specifically addressed in the _____ section of the Omnibus Trade and Competitiveness act.

market access

export expansion

import relief

foreign exchange regulation

trade deficit

Q46. An appreciation of the U. S. dollar would
a. encourage foreigners to invest in the United States
b. discourage foreigners from buying U. S. goods
c. discourage the travel abroad of U. S. citizens
d. encourage foreign travel in the United States

Q47. The financial account of the balance of payments includes the purchase and sale of physical assets but not of financial assets.
a. true
b. false

Q48. Special Drawing Rights are issued by the
a. International Monetary Fund
b. Bretton Woods Organization
c. General Agreement on Tariffs and Trade
d. World Bank

Q49. The balance of payments includes
a. only exports, imports, and service transactions
b. the balance on current account, plus all capital transactions and all official transactions and the statistical discrepancy
c. only the official transactions
d. all goods and services produced in a nation's economy during a given year

Q50. A debit item on the U. S. balance of payments is any transaction that
a. results in a loss by U. S. sellers
b. results in a loss by U. S. buyers
c. makes foreigners use up their holdings of U. S. dollars
d. makes U. S. dollars available to foreigners

ECON 295 Chapter Notes - Chapter 35: Canadian Dollar, Gdp Deflator, Purchasing Power Parity

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