International economic relations practice

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Uploaded: 08.12.2013
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International economic relations practice, 10 cases.
Situation 1.
In an open economy gross income is measured by two indicators: gross national product (GNP) and gross domestic product (GDP). Consider the following income from economic activities in terms of their inclusion in the GDP or GNP, and fill in the table. If Y is meant for GNP, which of the following table is included in the net export of the United States?

Situation 2.
In India, the land is relatively abundant factor of production, and capital - relatively scarce. Compare the effect on the income level of land owners and owners of capital growth outstripping the supply of land in cases where:
a) India is not involved in international trade;
b) India is developing free trade with other countries.
How will your answers to these two questions, if the proposal is growing faster pace of capital?

Situation 3.
The table shows data on the share of income of factors in the value added in the production of grains and sugars, as well as in the national income of the country A.
Suppose that country A has a comparative advantage in the production of grain and as a result of the establishment of the free trade relations with other countries starting to export grain and imported sugar.
a) Calculate the rate of export specialization Si, x for each of the three factors (labor, land, capital).
b) If the factors are completely unable to move between sectors, who would benefit from increased trade? Who would lose?
c) If the factors had absolute mobility within the country, who have won and lost in this case?

Situation 4.
True or False?
a) The introduction of import quotas and tariffs is an effective means of restoring a negative current account balance.
b) In accordance with the 'roles' fiscal policy should be used to achieve external equilibrium in an open economy with a high marginal propensity to import.
c) The value of net exports is independent of the private savings, but depends on the state budget.
d) It is impossible to achieve both internal and external balance, using only one tool of macroeconomic policy.
d) The current account deficit is financed mainly net capital inflows.

Situation 5.
It will look like the curves of internal and external equilibrium on the graph in the coordinates of the real exchange rate (RER) and total tax (T)? Is the slope of curves constructed on the slope of the curves in the diagram Swan built in coordinates RER and G?

Situation 6.
Using the balance sheet of the Central Bank show how account deficit affects the monetary base at fixed exchange rates. Show as well as sterilization is recognized in the balance sheet of the Central Bank. Under what conditions the possibility sterilizatsdi account deficit undertaken by the Central Bank, are limited?

Situation 7.
The economy is at the level of potential output (Y *). Consumption (C) depends on disposable income, investment (I) do not depend on interest rates, the state budget is balanced (BS = 0). What will happen to private savings (Sp), national savings (Sn), the state budget and net exports (NX), if the government decides to reduce the amount of the total tax (T)?

Situation 8.
The total output in the economy of 2000, total expenses of residents for goods and services - in 2300, the capital account - 200. As far as the amount of change in the money supply in the economy, if the Central Bank domestic credit increases by 85, and the money multiplier is equal to 2?

Additional information

Situation 9.
The equation of the LM curve in a small open economy with a floating exchange rate E is of the form Y = 200 r - 300 + 2 (M / P), the equation of the IS curve has the form Y = 300 + 2G - 2T + 4NX - 100 r. The function is given by net exports NX = 200 - 100E. The price level is P = 1. The level of the global interest rate = 2.5%. Money supply M = 250. Public expenditure G = 200. Net taxes T = 150. The real exchange rate of E = 1.0. The equilibrium of GDP if the financial sector of the economy affected by the global interest rate. Determine in this case need to change government spending, net taxes, net exports, the exchange rate, if the government wants to maintain the equilibrium of GNP. Calculate how to be a new level of money supply, ensuring the maintenance of a fixed exchange rate, if government spending increased to 250.

The situation 10
With Mundell - Fleming determine how at fixed and floating exchange rates will change the total income, exchange rate and the current account as a result of the following factors:
a) falling public confidence in the future lead to a reduction in costs and an increase in savings;
b) improve the reliability of Eastern European car leads to an increase in demand of the Russian population on imported cars;
c) the establishment of ATMs for cash dispensing leads to a reduction in the demand for money.

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