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tut8_(march5) - news is that the increase in output and...

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Economics 291: Canadian Macroeconomic Policy Tutorial #8 (week of March 5) 1. In a small open economy, desired investment is $650, private saving is $600, and government budget deficit is $50. Calculate the current account balance. 2. If the government of large open economy increases its purchase of goods and services, what will happen to its current account balance? 3. The chief economic advisor of a small open economy makes the following announcement: “We have good news and bad news: The good news is that we have just had a temporary beneficial productivity shock that will increase output; the bad
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Unformatted text preview: news is that the increase in output and income will lead domestic consumers to buy more imported goods, and our current account balance will fall.” Analyze this statement, taking as given that a beneficial productivity shock has indeed occurred. 4. What will happen to the exchange rate and net export in each of the following cases? (a) The foreign real interest rate falls (b) Foreign output falls (c) Foreign demand for domestic goods falls (d) Domestic output falls (e) The domestic real interest rate falls...
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