Country A is one of the largest and open economy, with a real interest rate of 3.27%. GDP growth rate of 2.2%. Current account deficit. Inflation of 1.81%. Country B is a large and open economy, with a real interest rate of 1.65%. GDP growth rate of 2.16%. Current account deficit. Inflation of 1.61%. Country C is a small and open economy with a real interest rate of 5.15%. GDP growth rate of 0.73%. Current account surplus. Inflation of 0.56%. What would the intertemporal model predict about capital flows and the current account balances of the three countries.

Country A is one of the largest and open economy, with a real interest rate of 3.27%. GDP growth rate of 2.2%. Current account deficit. Inflation of 1.81%. Country B is a large and open economy, with a real interest rate of 1.65%. GDP growth rate of 2.16%. Current account deficit. Inflation of 1.61%. Country C is a small and open economy with a real interest rate of 5.15%. GDP growth rate of 0.73%. Current account surplus. Inflation of 0.56%. What would the intertemporal model predict about capital flows and the current account balances of the three countries.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Open-economy Macroeconomics: Basic Concepts

Section: Chapter Questions

Problem 9PA

See similar textbooks

Similar questions

What does it mean to say that a currency appreciates? Depreciates? Becomes stronger? Becomes weaker?
Question 15 What is the likely result from a depreciation of a nation's currency when its economy is already operating at its full-employment level of outpul? CA, Net exports would fall and contribute to demand-pull inflation. OB. Net exports would fall, but equilibrium GDP would rise. OC. Net exports would rise and contribute to demand-pull inflation. CD Net exports would rise, but equilibrium GDP would fall.
Table 1: The national income accounting Items $ million Exports 17.8 Depreciation Government expenditures Net private domestic investment Transfer payments Imports Таx Net factor income abroad Consumption expenditures 11.8 59.4 52.1 13.9 16.5 40.5 2.2 219.1 a) Find the GDP & GNP value. b) Find the Y & Yd value. c) Given rate of inflation = 5%, calculate the real Yd value.
Brazil began indexing various categories of income to a. slow inflation. O b. keep prices from rising even faster. O c. improve a balance of payments deficit. O d. protect citizens from the effects of inflation.
Question 68 The great country of Naboombu has private savings of $700 billion, investment of $800 bilion, tax revenue of $5s00 billion, and ment expenditures of $350 billion. What is the trade balance, does the country have a trade surplus or deficit, and is the net lender or borrower international (respectively)? the trade balance is $50 billion, the country has a trade surplus, and the country is a net borrower internationally O the trade balance is S-150 billion, the country has a trade deficit, and the country is a net lender internationally the trade balance is $50 billion, the country has a trade surplus, and the country is a net lender internationally x the trade balance is $-50 billion, the country has a trade deficit, and the country is a net borrower internationally
Which of the following scenarios is most likely to lead to a country experiencing a contractionary devaluation? a. Havingassetsandliabilitiesbothpredominantly denominated in the domestic currency b. Havingassetspredominantlydenominatedinthe domestic currency and liabilities in a foreign currency c. Having assets predominantly denominated in a foreign currency and liabilities in the domestic currency d. Havingassetsandliabilitiesbothpredominantly denominated in a foreign currency.
Refer to the graph. The movement from point 1 to point 2 is stimulated by a disequilibrium in which there is domestic and O A. unemployment; trade deficit O B. overemployment; trade deficit OC. unemployment; trade surplus O D. overemployment; trade surplus O E. inflation; unemployment Exchange Rate, E |↑ EP/P |↓ XX¹ Domestic Spending, A Xx² <= 2
Economics Question
Question:The electricity prices and the natural gasprices have increased drastically, 15 percentand 12 percent respectively. The direct effectof these increases on the inflation rate is 0.6percent, and the indirect effect is more than 1percent. Taking into consideration that theproducer price index is over 38 percent.1.Please discuss in detail the effects of theseincreases on the consumer price index,exchange rate and the current account deficit 2. What are the policies that should beimplemented to counterbalance the effects ofthese price increases on the economy?
Suppose the real exchange rate is 10, the domestic price level is 8, and the foreign price level is 4. (i) What is the nominal exchange rate?e - enor-P Use the expression: rea! - PrOT ,where ereal is real exchange rate, enor is nominal exchange rate, P is domestic price level and Pro, is foreign price level (ii) Suppose the real exchange rate rises by 10%, the inflation rate in the domestic country is 6%, and the inflation rate in the foreign country is 4%. By what percentage does the nominal exchange rate change?
If a country is an international borrower, then its domestic real interested rate is _________ the international real interested rate. a. Higher than b. lower than c. the same d. uncertain
28. A devaluation of a country's currency to improve its trade deficit would most likely benefit a producer of: A. export goods that have no close substitutes. B. an export good that represents a relatively small proportion of consumer expenditures. C. luxury goods for export. Hint: A devaluation of the currency will reduce the price of export goods in foreign currency terms. The greatest benefit would be to producers of goods with more elastic demand. Luxury goods tend to have higher elasticity of demand, while goods that have no close substitutes or represent a small proportion of consumer expenditures tend to have low elasticities of demand.