ECON 2010 Chapter : Final Exam Ch Outline Study Guide

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azuremammoth471

15 Mar 2019

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Open economy- an economy that has interactions in trade or finance with other countries. Closed economy- an economy that has no interactions in trade or finance with other countries. Balance of payments- the record of a country"s trade with other countries in goods, services, and assets. Current account- the part of the balance of payments that records a country"s net exports, net income on investments, and net transfers. Balance of trade- the difference between the value of the goods a country exports and the value of the goods a country imports. Financial account- the part of the balance of payments that records purchases of assets a country has made abroad and foreign purchases of assets in the country. Net foreign investment- the difference between capital outflows from a country and capital inflows; If nfi is greater than 0, inflows is less than outflows. Problem: if capital outflows is greater than inflows, nfi is positive and national savings is increased.

Related Questions

80. What is dollarization? What risk does a country eliminate when it dollarizes?

81. When a country is open to free trade, there will be gains to:

	A.	producers in the country that is importing the good.
	B.	producers in the country that is exporting the good.
	C.	all producers of the good in both the importing and the exporting country.
	D.	None of the producers will gain.

82. When the European Central Bank made loans to member countries, it sometimes attached conditions to the loans. What were the MOST common requirements for getting these loans?

83. When the United States has a current account deficit, it must:

	A.	sell more exports to balance the account.
	B.	reduce its net transfers to balance the account.
	C.	be balanced with capital inflows from foreign countries.
	D.	buy bonds from foreign countries to balance the account.

1. True or False: Increases in imports will always lead to NET job losses in the U.S. domestic economy.

Would this be false?

2. True or False: If all countries could restrict imports and promote exports, world output would rise.

Would this be false as well?

3. Which of the following statement is FALSE?
A.Quotas restrict the quantity of a good that is imported into a country.
B.One result of quotas is that consumers of the good facing the quota will pay a higher price for the good.
C.Domestic producers of the good will benefit because they face less foreign competition.
D.Government collects the revenue from quotas.

Is it B?

4. True or False: If country A has an absolute advantage in producing many goods and services over another country B, then country A will NEVER have an incentive to trade with country B.

I want to say its False because regardless if country A has an absolute advantage it still needs to trade with country B. I think?

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

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ECON 2010 Chapter : Final Exam Ch Outline Study Guide

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