In 2016 the country of Ikonomia has a current account deficit of $1 billion and a nonreserve

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In 2016 the country of Ikonomia has a current account deficit of $1 billion and a nonreserve financial account surplus of $700 million. Ikonomia’s capital account is in a $150 million surplus. In addition, Ikonomian factors located in foreign countries earn $700 million. Ikonomia has a trade deficit of $600 million. Assume Ikonomia neither gives nor receives unilateral transfers. Ikonomia’s GDP is $9.4 billion.

a. What happened to Ikonomia’s net foreign assets during 2016? Did it acquire or lose foreign assets during the year?

b. Compute the official settlements balance (OSB). Based on this number, what happened to the central bank’s (foreign) reserves?

c. How much income did foreign factors of production earn in Ikonomia during 2016?

d. Compute net factor income from abroad (NFIA).

e. Using the identity , show that .

f. Compute Ikonomia’s gross national expenditure (GNE), gross national income (GNI), and gross national disposable income (GNDI).

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International Economics

ISBN: 9781319218508

5th Edition

Authors: Robert C. Feenstra, Alan M. Taylor

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