International Finance Theory and Policy
by Steven M. Suranovic

Finance 5

Finance 5

Finance Questions 5 2-4


1. Use the economic data for the fictional country of Sandia to answer the following questions. (Assume the unilateral transfers and net income balance is zero)

Sandia Economic Data
(billions)
Gross Domestic Product
$ 400
Imports of Goods and Services $ 140
Investment Spending
$ 20
Private Saving
$ 30
Exports of Goods and Services
$ 100
Government Transfers
$ 40
Government Tax Revenues
$ 140
Government Spending
$ 140
Consumption Spending
$ 280

 

  1.  Calculate Sandia’s Good and Services (G&S) balance.  Is it a deficit or surplus?

 

  1.  Calculate Sandia’s government budget balance.  Is it a deficit or surplus?

 

  1.  Write out the national income identity.  Verify whether Sandia’s data satisfies the identity.

 

  1.  Write out the twin-deficit identity.  Verify whether Sandia’s data satisfies the identity. 

 

 

International Finance Theory and Policy - Chapter 5: Last Updated on 1/5/08