5. Note the following accounting identity for gross national income (GNI): GNI =C+I+G+TB+NFIA Using this expression, show that in a closed economy, gross domestic product (GDP), gross national income (GNI), and gross national expenditures (GNE) are the same. Show that domestic investment is equal to domestic savings. 3. The nation of Pecunia had a current account deficit of $1 billion and a nonreserve financial account surplus of $500 million in 2008. a. What was the balance of payments of Pecunia in that year? What happened to the country's net foreign assets? b. Assume that foreign central banks neither buy nor sell Pecunian assets. How did the Pecunian central bank's foreign reserves change in 2008? How would this official intervention show up in the balance of payments accounts of Pecunia? c. How would your answer to (b) change if you learned that foreign central banks had purchased $600 million of Pecunian assets in 2008? How would these official purchases enter foreign balance of payments accounts?

5. Note the following accounting identity for gross national income (GNI): GNI =C+I+G+TB+NFIA Using this expression, show that in a closed economy, gross domestic product (GDP), gross national income (GNI), and gross national expenditures (GNE) are the same. Show that domestic investment is equal to domestic savings. 3. The nation of Pecunia had a current account deficit of $1 billion and a nonreserve financial account surplus of $500 million in 2008. a. What was the balance of payments of Pecunia in that year? What happened to the country's net foreign assets? b. Assume that foreign central banks neither buy nor sell Pecunian assets. How did the Pecunian central bank's foreign reserves change in 2008? How would this official intervention show up in the balance of payments accounts of Pecunia? c. How would your answer to (b) change if you learned that foreign central banks had purchased $600 million of Pecunian assets in 2008? How would these official purchases enter foreign balance of payments accounts?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter23: The International Trade And Capital Flows

Section: Chapter Questions

Problem 44P: Imagine that the U.S. economy finds itself in the following situation: a government budget deficit...

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