Ch 13

Question 1

GNP (Gross National Product)

Answer 1

Value of all final newly produced goods and services produced by nation’s factors of production in a given time period.

Question 2

GDP (Gross Domestic Product)

Answer 2

Value of all final newly produced goods and services produced by a nation’s factors of production WITHIN their borders in a given time period

Question 3

GNP FORMULA

Answer 3

GNP = Y = C + I + G + CA

Question 4

CA

Answer 4

The current account which is equal to CA = X - M + NFI (Net Factor Income)

Question 5

Net factor income

Answer 5

Factor income received abroad minus factor income paid abroad

Question 6

What does it mean when the current account is negative? 

Answer 6

This means that the nation is currently borrowing from the rest of the world 

Question 7

What is the difference between the trade balance and the current account balance?

Answer 7

The current account balance includes net factor income

Question 8

What is the difference between GNP and GDP?

Answer 8

GDP is GNP minus payments from foreign countries and payments to foreign countries. AKA, it’s production within country borders, while GNP includes productions by citizens and businesses abroad.

Question 9

How can you make the GNP measurement more precise?

Answer 9

Adjust the GNP for depreciation of physical capital and unilateral transfers to and from other countries.

Question 10

National income identity for an open economy

Answer 10

Y = C + I + G + NX

Question 11

Discuss the values of private saving in closed and open economies

Answer 11

In a closed economy, private saving is equal to I + (G - T). In an open economy, it equals I + CA + (G-T). Open helps extend opportunities for private saving/borrowing.

Question 12

An open economy can save by

Answer 12

Either building up its capital stock or by acquiring foreign wealth 

Question 13

Ireland’s remarkable spurt of GDP growth between 2014 and 15 was

Answer 13

In large part, an accounting phenomenon reflecting tax avoidance by large multinationals from other countries

Question 14

What does international macro account for that international trade does not?

Answer 14

Unemployment, saving, trade imbalance, and money/price level

Question 15

Why is the current account important?

Answer 15

It is on the right hand side of the National income identity for an open economy and it signals the direction of borrowing.

Question 16

What is the largest component of GNP in the US?

Answer 16

Consumption expenditure

Question 17

Private Saving

Answer 17

Sp = Y - T - C (part of disposable income saved)

Question 18

Government Savings

Answer 18

Sg = T-G (net tax revenue)

Question 19

National Savings

Answer 19

S = Y - C - G = CA + I