Consider the economy of Aureus. In Aureus, domestic investment is $300 million, and its residents earned $10

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Consider the economy of Aureus. In Aureus, domestic investment is $300 million, and its residents earned $10 million in capital gains during 2006. Residents of Aureus purchased $150 million in new foreign assets during the year, and foreigners purchased $120 million in Aureus assets. Assume that the valuation effects total $1 million in capital gains.

a. Calculate the change in domestic wealth in Aureus.

b. Calculate the change in external wealth for Aureus.

c. Calculate the total change in wealth for Aureus.

d. Calculate domestic savings for Aureus.

e. Calculate Aureus’s current account. Is the CA in deficit or surplus?

f. Explain the intuition for the CA deficit/surplus in terms of savings in Aureus, financial flows, and its domestic/external wealth position.

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a The change in domestic wealth is the sum of additions to the capital stock plus capital gains earn...View the full answer

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International Economics

ISBN: 9781319218508

5th Edition

Authors: Robert C. Feenstra, Alan M. Taylor

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Question Posted: Jan 09, 2023 09:34 AM

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Consider the economy of Aureus. In Aureus, domestic investment is $300 million, and its residents earned $10

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a The change in domestic wealth is the sum of additions to the capital stock plus capital gains earn...View the full answer

International Economics

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