ECONOMICS 353 (SECTION 1) L. Tesfatsion/Spring 02
EXERCISE 8: 6 POINTS TOTAL DUE: Tuesday, April 2, 9:30 A.M.
*IMPORTANT REMINDER: LATE ASSIGNMENTS CANNOT BE ACCEPTED -- NO EXCEPTIONS*
Q1. In GDP accounting for the HC, ROW saving during any given time period T
is defined to be ___________ minus ______________.
A. HC total investment in ROW; ROW net exports to the HC
B B. Total income received by ROW from the HC; HC exports to ROW
C. Total income received by the HC from ROW; HC imports from ROW
D. HC imports from ROW; HC exports to ROW
E. None of the above
Q2. According to U.S. national income accounting principles, which item(s)
below would be directly entered in the 2002 U.S. CAPITAL account KA:
A A. Purchase in 2002 by the Indonesian government of a U.S. Treasury bond
from the Federal Reserve Bank of New York.
B. A purchase in 2002 by Bill Gates of the empire state building from
Donald Trump.
C. Interest income received in 2002 by the U.S. government on an Austrian
government bond purchased from the Austrian goverment on Jan 1, 2002.
D. Rent received in 2002 by U.S. owners of a factory building in Egypt.
E. All of the above
Q3. The HC CURRENT ACCOUNT in any given time period T must, as an
accounting identity, equal
A. HC net exports in period T
B. ROW saving in period T multiplied by -1
C. HC national saving in period T minus HC total gross investment
in period T
D D. Both B and C
E. None of the above
Q4. A U.S. current account _____ indicates that the U.S. is INCREASING its
net claims on foreign assets because the U.S. is _______ the rest of the world.
A. surplus; a net borrower from
B B. surplus; a net lender to
C. deficit; a net borrower from
D. deficit; a net lender to
Q5. Suppose the world is divided between HC and ROW. Using the definitions
for the HC current account CA, the HC "nonofficial" capital account NKA, the
balance of payments BP, and the HC capital account KA = NKA - BP introduced
in the online notes for Mishkin Chapter 19, the HC balance of payments
ACCOUNTING IDENTITY implies that
A. the sum of CA and NKA equals BP.
B. BP is zero.
C. the sum of CA and KA is 0.
D. CA equals KA.
E E. both A and C.
Q6. Suppose the world is divided between HC and ROW. If the HC is in a
balance of payments EQUILIBRIUM, this means
A. in net terms, the HC is neither borrowing from nor lending to ROW.
B. the HC central bank is intervening in the foreign exchange market to
ensure ROW currency demand equals ROW currency supply.
C. the HC current account is zero.
D D. ROW currency demand equals ROW currency supply without the need for
HC central bank intervention in the foreign exchange market.
E. None of the above.
