Problem Session 1 Questions.pdf - EC 208 u2013 Spring 2019...

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EC 208 – Spring 2019 27-28/02/2019 Murat Koyuncu PROBLEM SESSION 1 Q1. Balance of Payments Accounting and National Income Identity Suppose we have the following information from 2018 about a country called Tikea: - had a current account deficit of $1.2 billion. - had a trade deficit of $900 million. - the IMF forgave a $100 million portion of this country’s debt. - Tikea neither gives, nor receives unilateral transfers. - Its GNP is $10 billion. - Tikean residents, Tikis, consumed $8.2 billion worth of goods and services. - Tikean government spent $500 million. a) What happened to Tikea’s net foreign assets during 2018? Did this country acquire or lose foreign assets during the year? b) Suppose Tikean factors of production located in foreign countries earned $600 million. What is the level of payments to the foreign factors of production located in Tikea? c) What is the level of national savings in Tikea? d) What is the investment spending by Tikean firms? Q2. Refer to the exchange rates below to answer the following questions. Note that the unit notation

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