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review_solutions

# review_solutions - 1 a NX home NX for = 0 and NX = Y C d I...

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Unformatted text preview: 1 a.) NX home + NX for = 0 and NX = Y- ( C d + I d + G ). So, NX home = 1000- (320 + 0 . 4(1000- 200)- 200 r w + 150- 200 r w + 275) = 400 r w- 65 and NX for = 1500- (480 + 0 . 4(1500- 300)- 300 r w + 225- 300 r w + 300) = 15 + 600 r w So, 400 r w- 65 + 600 r w + 15 = 1000 r w- 50 = 0 , → r w = 50 1000 = 5% C d = 630 , C d for = 945 S d = 95 , S d for = 255 I d = 140 , I d for = 210 CA =- 45 , CA for = 45 (1) b.) r w = 8% C d = 604 , C d for = 936 S d = 71 , S d for = 264 I d = 134 , I d for = 201 CA =- 63 , CA for = 63 (2) 2 GDP = \$1 , 000 , 000 , total production of coconuts NFP = \$25 , 000 , interest from bonds - \$500,000*0.05=\$25,000 GNP = GDP + NFP = \$1 , 025 , 000 production of coconuts plus net factor income from abroad (bond interest) S = Y- C- G + NFP = \$1 , 000 , 000- \$1 , 025 , 000- \$0 + \$25 , 000 = 0 CA = 0 CA = S- I = 0 → I = 0 NX = CA- NFP = \$0- \$25 , 000 =- \$25 , 000 KFA =- CA = \$0 (3) The \$500,000 in foreign bonds provides income of \$500 , 000 * . 05 = \$25 , 000 per year. Since people consume exactly \$1,025,000, they must be using the \$25,000 of foreign interest receipts to buy imported consumption goods. So net exports are -\$25,000 and the current account balance is zero. Since the current account balance is zero, the capital and financial account balances are also zero.is zero, the capital and financial account balances are also zero....
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review_solutions - 1 a NX home NX for = 0 and NX = Y C d I...

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