Question

Show all your work for full credit owing information on a hypoth Shormation on a hypothetical economy, the Kim Empire, for the year National Income and Product Accounts (NIPA) OP Accounts Government purchases total $2.2B Net of $100M in unilateral transfers A $SOOM government budget deficit Foreign factors located in the Empire earn $280M GNP is $168 Current account surplus of $2B Trade surplus of $1.4B Consumption is $10B Capital account surplus of $160M a. Calculate the Empire's financial account balance. What has happened to the Empire's foreign asset position? Explain.(2) b. Calculate NFP (Net factor payments) for the Empire. How much did the Empire's factors abroad earn? (2) c is the Empire a net borrower or net lender? Explain how you know (1) d. What is the Empire's 2018 GDP? (1)

Answer 1

Ans:- (a) from the BOP Identity: BOP = Current account Surplus + Foreign assets + capital account suplus = 0 > Foreign assets -- Current account Surplus + Capital account Surplus) 5- ( $2,000 million + $ 160 million) - -$2,160 million Since foreign assets <0 Foreign purchase of Kim Empire's assets < Kim Empire's purchase of foreign assets. Kim Empire is a met importer of assets, This is called accumulating assets, kim Empire is a met lender. Because it has current account surplus. This gives rise to deficit in its financial account. (Since capital account is in Surplus)

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