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Economics - Several Questions

1. What is the difference between National Income, Gross National Product, and Gross Domestic Product? Why do most countries now use GDP as a measure of national output?

2. What is the difference between output and expenditure? Does this explain how national income accounting also uses a type of double-entry bookkeeping?

3. What is the difference between national savings in an open and closed economy? What implication does this have for current account surpluses and deficits?

4. When might a government be concerned about a large current account deficit or surplus? Why might a government be concerned about its official settlements balance (it's balance of payments?)

5.What is the impact of large government expenditures and deficits on national savings and investment? When are deficits a good thing and when are they not?

6.What are the three main components in the balance of payments?

7. A canadian resident purchases shares in Microsoft. How is this transaction recorded in the canadian balance of payments?

8.Nortel sells equipment to ATT in the United states. How is this transaction recorded in the balance of Payments of both canada and the United States?

9.A tourist from New York buys a meal in Toronto, paying with their Visa card from a U.S. bank. How is this transaction recorded in the Balance of Payments of both Canada and the United states?

10. Canada forgives Argentina a part of its loans. How does this debt forgiveness show up in our Balance of Payments?

11.What are official reserve transactions? What is foreign exchange intervention?

12. IF the value of the Canadian dollar goes up relative to the U.S. dollar, would you expect an immediate improvement in our Current Account balance(export minus imports)? Why or why not?

13.Are vehicle currencies explained by money's usefulness as a medium of exchange and unit of account? If so, why do some currencies become vehicle currencies while others do not?

14.What might cause a reduction in aggregate real money demand when the population does not shrink? How would you show this diagrammatically?

15. If one country's money supply grew at a faster rate than anther's, in which country would you expect to see currency depreciation? Would your answer change if the population of the first country grew faster than the second country?

16. IN reality, given population growth, do you expect inflation if money supply grows at a slower rate than population growth?

17.Empirically, has there been a relationship between money supply growth and inflation? If so why do some countries continue to print money?

18. Can exchange rate over shooting occur under temporary change in the money supply?

19.IT is possible to observe exchange rate undershooting?

Solution Summary

The response goes into a great amount of details about several economics issues. The response talks about GDP, the difference between output and expenditure, national savings, government expenditure, investments, foreign exchange and a number of other topics. The solution provides a brief and to the point answer to all the questions being asked. The solution is very easy to follow along. Overall, an excellent response.