Exam 1

Question 1

GDP =

Answer 1

C + I + G + X - M
or
GNE + TB

Question 2

C

Answer 2

consumption goods, purchased by households

Question 3

I

Answer 3

investment goods, purchased by business and government

Question 4

G

Answer 4

government provided consumption services

Question 5

X

Answer 5

exports, purchased by foreigners

Question 6

M

Answer 6

imports, purchases from foreigners

Question 7

Personal consumption expenditures

Answer 7

C, household purchases of goods and services, covers all items, regardless of where they were produced

Question 8

Domestic investment

Answer 8

I, business and government purchases of new equipment, software and structures, also includes new home construction, measures additions to domestic capital stock, regardless of residency status of owner, does not include investment in human capital (education)

Question 9

Government consumption expenditures

Answer 9

G, government provision of goods and services (national defense, public schools, etc), not outlays–does not include transfer payments (social security, welfare)

Question 10

Exports and imports (X-M)

Answer 10

includes services (banking, education, tourism, etc.) and goods in an intermediate stage of production

Question 11

GNI

Answer 11

calculated as GDP plus income received from abroad minus incomes paid to foreigners

Question 12

GNE =

Answer 12

C + I + G

Question 13

GNI =

Answer 13

GDP + IR - IP
or
GNE + CA

Question 14

CA =

Answer 14

TB + (IR - IP)
or
S - I

Question 15

S =

Answer 15

GNI - C - G

Question 16

S - I =

Answer 16

CA
or 
KO - KI
or
(X - M) + (IR - IP)

Question 17

Current Account

Answer 17

Net of exports of goods and services and income receipts and imports of goods and services and income payments

Question 18

Primary income receipts

also same for payments

Answer 18

investment income
--direct investment income
--portfolio investment income
--other investment income
compensation to employees

Question 19

Financial Account

Answer 19

Net US acquisition of financial assets (net increase in assets/ financial outflow) and Net US incurrences of liabilities (net increase in liabilities/ financial inflow)

Question 20

acquisition of assets and incurrence of liabilities

Answer 20

direct investment assets
portfolio investment assets
--equity and investment fund shares
--debt securities 
other investment assets
--currency and deposits
--loans and other

Question 21

IR

Answer 21

income received from abroad (income receipts)

Question 22

IP

Answer 22

income payments to foreigners

Question 23

X + IR + KI = M + IP + KO

Answer 23

sources of funds must equal uses of funds
when you buy something, you must pay for it
when you sell something, you will be paid for it

Question 24

X - M =

Answer 24

(IP - IR) + (KO - KI)

Question 25

What four asian countries were hit the hardest in the 1997-98 crisis?

Answer 25

Indonesia
Thailand
South Korea
Malaysia
*Hong Kong

Question 26

crisis of ‘97-98

Answer 26

Financial deregulation leads to large foreign capital inflows, fuels a credit boom and bubbles in real estate and stock markets
sudden panic among foreign investors leads to cutoff of foreign lending, major currency depreciations

Question 27

Factors responsible for e. asian crisis

Answer 27

moral hazard/ US and IMF bailouts
lack of transparency, regulation, financial infrastructure in countries that opened up their capital account
loosely pegged exchange rates
contagion/ capital flight
not large government budget deficits or debt

Question 28

Making capital flows safer

Answer 28

financial infrastructure (info disclosure, accounting standards, financial law, bank supervision and regulation)
sound fiscal and monetary policy
sound exchange rate policy
selective capital controls (foreign direct investment is stable, bank lending is unstable)

Question 29

S =

Answer 29

(GNI - T - C) + (T - G)

Question 30

Cases of KO > KI

Answer 30

mature economies low MPK
demography
culture
policy: government directed outflow

Question 31

Cases of KO < KI

Answer 31

investment boom or high MPK
–US railroad and IT booms
Less developed countries (lack capital)
Newly liberalized countries (educated, obsolete K)

Question 32

impediments to global market equilibrium

Answer 32

(international transfer of purchasing power)
imperfect substitutes
nontraded goods

Question 33

Welfare analysis of global capital flows

Answer 33

allocative efficiency (+)
multinational corporations and technology transfer (+)
portfolio diversification (+)
international capital flows and financial crisis (-)