ESSAY QUESTIONS AND PROBLEMS (CHAPTER 1)

1. Fill in the following table:

CA Sp I G T
15 50 25 12 2
8 50 30 15 3
9 40 25 10 4
35 50 10 10 5
30 10 30 20 10
22 200 140 50 12
–25 200 140 100 15
150 400 200 30 20
–280 100 200 200 20

2. Assume
C = 50
G = 15
I = 15
T=5
EX = 10
IM = 15
Calculate national income, the current account balance, and national savings

3. The measures of exports and imports used in GNP accounts include final and intermediate goods. Does this cause
a double counting?
Yes, including both final and intermediate goods in the measures of exports and imports can lead to double counting
when calculating GNP because the value of intermediate goods has already been included in the value of final
goods.
In fact, in the GNP account, the value of intermediate goods is not counted when calculating.
4. Does the trade barriers that are intended to restrict imports necessarily improve the current account balance?
CA = EX-IM
Yes, by restricting import, trade barriers can reduce the value of imported goods and services. This can lead to an
improvement in current account balance.

5. Is it possible for a country to have a current account deficit at the same time it has a surplus in the balance of
payments?
Yes, it is possible for a country to have a current account deficit while having a surplus in the balance of. This is
because the balance of payments is a record of all economic and financial transactions between residents
organizations or individuals of a country and its non resident. It consists of current account, capital account,
financial account. So, it is possible for a country to have a surplus in the balance of payments if it receive more
capital inflows or financial investments than its deficit in current account.