Chapter 10: Q 34. (page 267)
If a country is a big exporter, is it more exposed to
global financial crises?
The country may be more exposed to financial crisis.
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If a country is running a government budget surplus, why is (T – G) on the left side of the saving investment identity?
Table 10.7 provides some hypothetical data on
macroeconomic accounts for three countries represented
by A, B, and C and measured in billions of currency
units. In Table 10.7, private household saving is SH,
tax revenue is T, government spending is G, and
investment spending is I.
| A | B | C | |
| SH | 700 | 500 | 600 |
| T | 00 | 500 | 500 |
| G | 600 | 350 | 650 |
| I | 800 | 400 | 450 |
Table 10.7 Macroeconomic Accounts
a. Calculate the trade balance and the net inflow of
foreign saving for each country.
b. State whether each one has a trade surplus or
deficit (or balanced trade).
c. State whether each is a net lender or borrower
internationally and explain.
If countries reduced trade barriers, would the
international flows of money increase?
How did large trade deficits hurt the East Asian countries in the mid 1980s? (Recall that trade deficits are equivalent to inflows of financial capital from abroad.)
Using the national savings and investment identity, explain how each of the following changes (ceteris paribus) will increase or decrease the trade balance:
a. A lower domestic savings rate
b. The government changes from running a budget surplus to running a budget deficit
c. The rate of domestic investment surges
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