ECON 4350 Chapter 13

Which of the following is NOT part of the definition for GNP?

"produced within a countries' borders"

In the U.S., gross investment has fluctuated between ___ and ____ percent of GNP in recent years

11; 22

1929 Government Purchases percent of GNP

8.5%

Which of the following is true about current cost method and market value method?

Based on current cost method, the BEA's 2006 estimate of US net foreign wealth was 2,539 billion

Shall a government be concerned about a large current account deficit or surplus?

Both current account surplus and deficit might not be sustainable in a long run

The difference between GNP and national income is a trivial amount.

False. National income equals GNP less depreciation, plus net unilateral transfers, less indirect business taxes

Private saving =

GNP - Consumption - Taxes

Investment expenditure =

Govt saving + private saving

In an open economy, private saving is equal to

I - CA + (G-T)

Do the data on the U.S. official settlements balance give an accurate picture of the extent to which foreign central banks buy and sell dollars in currency markets?

No, only a partial picture because it shows net value of all transactions

Government savings =

Taxes - spending

Which of the following statements about the central bank is true?

The fed holds only a small level of offical reserve assets other than gold

Gross national Product

Value of all final goods and services produced by the country's factors of production and sold on the market ina given time period.

Which of the following are true?

We can describe the current acount surplus as the difference between income and absorption. A country could finance a current account deficit by using previously accumulated foreign wealth to pay for its imports. A country with a current account suprlus is earning more on its exports than spending on imports.A country with a current account deficit must be increasing its net foreign debts by the amount of the deficit

In an open economy hodling GNP and consujmption constant and where private savings equals domestic investment, a government budget deficit must be matched by

a current account deficit

Government purchases are

all goods and services purchased by local, state and fed govt

In a closed economy, national saving

always equals investment

A country's current account

balance equals the change in its net foreign wealth

An open economy can save either by

bulding up its capital stock or by acquiring foreign wealth

Any transaction resulting in a receipt from foreigners is entered in the balance of payments accounts as a

credit

3 accounts

current, financial , capital : they all equal zero on balance of payments

Any transaction resulting in a payment to foreigners is a

debit

Movments in GNP and GDP usually

do not differ greatly as a practical matter

most likely cause for discrepancy

financial account

Disposable income is national income

less net taxes collected by households and firms by the government

National income equals

national output

GNP equals GDP plus

net receipts of factor income from the rest of the wordl

In open economies,

saving and investment arenot necessarily equal as they are in a closed economy

The services British capital provides in Spain are a service export from Britain

therefore they are added to GDP in calculating British GNP