Chapter 23: Q 1. (page 575)
If foreign investors buy more U.S. stocks and bonds, how would that show up in the current account balance?
No, it will not show up.
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In 2001, the United Kingdom's economy exported goods worth £192 billion and services worth another £77 billion. It imported goods worth £225 billion and services worth £66 billion. Receipts of income from abroad were £140 billion while income payments going abroad were £131 billion. Government transfers from the United Kingdom to the rest of the world were £23 billion, while various U.K government agencies received payments of £16 billion from the rest of the world.
a. Calculate the U.K. merchandise trade deficit for 2001.
b. Calculate the current account balance for 2001.
c. Explain how you decided whether payments on foreign investment and government transfers counted on the positive or the negative side of the current account balance for the United Kingdom in 2001.
Why does the trade balance and the current account balance track so closely together over time?
What is more important, a country’s current account balance or GDP growth? Why?
If domestic investment increases, and there is no change in the amount of private and public savings, what must happen to the size of the trade deficit?
In recent decades, has the U.S. trade balance
usually been in deficit, surplus, or balanced?
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