With Explanation PLEASE!! Suppose the world had only two countries and domestic

Question

With Explanation PLEASE!!

Suppose the world had only two countries and domestic residents of country A purchased $50 billion of assets from country B and country B purchased $30 billion of from country A. What would the net capital outflows of both countries be? $50 billion for country A and $30 billion for country B $30 billion for country A and $50 billion for country B $20 billion for country A and -$20 billion for country B -$20 billion for country A and $20 billion for country B In an open economy, gross domestic product equals $3,725 billion, consumption expenditure equals $2,225 billion, government expenditure equals $525 billion, investment equals $510 billion and net capital outflow equals $465 billion. What is national saving? Suppose the economy is in long-run equilibrium. In a short span of time, there is a decline in the money supply, a tax increase, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, we would expect the price level and real GDP both to rise. the price level and real GDP both to fall. the price level and real GDP both to stay the same. All of the above are possible. If international speculators lose confidence in foreign economies and want to move some of their wealth into the U.S. economy, then in the short run there is an increase in the value of the U.S. dollar in foreign exchange markets, a lower level of U.S. output and a lower U.S. price level. an increase in the value of the U.S. dollar in foreign exchange markets, a higher level of U.S. output and a higher U.S. price level. c) a decrease in the value of the U.S. dollar in foreign exchange markets, a lower level of U.S. output and a lower U.S. price level. a decrease in the value of the U.S. dollar in foreign exchange markets, a lower level of U.S. output and a higher U.S. price level. When the money market is drawn with the value of money on the vertical axis, if the Fed buys bonds ther the money supply and the price level increase. the money supply and the price level decrease. the money supply increases and the price level decreases. the money supply decreases and the price level increases.

Explanation / Answer

c)

outflows for country A: 50-30 =20

outflows for country A: 30-50 =-20

Y = C+I+G+(X-M)

3725 = 2225+525+510+465

National Savings = (Y-C-G) = I+NX = 3725-2225-525 = 975

b)

tax increase, money supply etc decrease will reduce the demand reluting in the fall in price(leftward shift in the demand curve and the upward sloping supply curve will have a new equilibrium)

a)

higher value of US dollar will lead to the reduction in exports and hence a fall in the production, import on the other hand will be cheaper leading to a decrease in price level.

a)

by buying bonds, Fed infuses more money in the markets, which causes an increase in the demand increasing the price level

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