{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Quick%20Quiz%204%21 - • Since trade surplus is equal to...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
© Hadi Salehi Esfahani Quick Quiz 4! Private savings and investment in China have increased by the same percentage of GDP over the past few years, while the government budget deficit as percent of GDP has increased. 1. What must have happened to China's trade surplus as percentage of GDP in recent years? 2. Assume that over the past few years the total saving in the rest of the world has remained unchanged relative to China’s GDP. What must have happened to the total investment in the rest of the world relative to Chinese GDP?
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
© Hadi Salehi Esfahani Solution to Quick Quiz 4! 1. What must have happened to China's trade surplus as percentage of GDP in recent years? Recall that Private Savings + Public Savings – I = NX . Diving both sides by GDP gives all variables as percentages of GDP. Saving net of investment as share of GDP has been constant for the private sector, but has declined for the public sector. Therefore, total domestic saving minus investment must have declined.
Background image of page 2
Background image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: • Since trade surplus is equal to the domestic (total of public and private) savings minus investment, China's trade surplus as percentage of GDP must have declined. © Hadi Salehi Esfahani Solution to Quick Quiz 4! 2. Assume that over the past few years the total saving in the rest of the world has remained unchanged relative to China’s GDP. What must have happened to the total investment in the rest of the world relative to Chinese GDP? • Recall that Domestic Savings + Foreign Savings = I . • Since China’s trade surplus has been declining, the rest of the world has had less foreign savings relative to Chinese GDP. • Given that the total domestic savings in the rest of the world have been constant relative to China’s GDP, total savings available for investment in the rest of the world must have been declining relative to China’s GDP. • Hence, investment in the rest of the world must have...
View Full Document

{[ snackBarMessage ]}

Page1 / 3

Quick%20Quiz%204%21 - • Since trade surplus is equal to...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon bookmark
Ask a homework question - tutors are online