Author Question: The table above shows some data for Wiland, a country whose currency is the bont. The official ... (Read 52 times)

Kikoku · **on:** Jun 29, 2018

The table above shows some data for Wiland, a country whose currency is the bont. The official settlement balance, net interest income, and net transfers from abroad are zero.

a) What is Wiland's imports of goods and services?
b) What is Wiland's current account balance?
c) What is Wiland's capital account balance?
d) What is Wiland's net taxes?
e) What is Wiland's private sector balance?

Question 2

In the above figure, if the price is 16 per unit, a profit maximizing perfectly competitive firm will

A) shut down.
B) incur an economic loss but continue to operate.
C) make zero economic profit.
D) make an economic profit.

yuyiding · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

a) The country's net exports are GDP minus consumption minus investment minus government purchases, which is 320 - 200 - 80 - 60 = -20 billion bonts. Net exports are the difference between imports and exports. Because Wiland's exports are 40 billion bonts and its net exports are -20 billion bonts, then it imports must equal 60 billion bonts.
b) Because net interest income and net transfers from abroad are zero, the current account balance equals net exports, so the current account balance is -20 billion bonts.
c) Because the official settlement balance is zero, the sum of the capital account balance and current account balance is zero, which means that the capital account balance is 20 billion bonts.
d) The government budget deficit is the difference between government purchases and net taxes, which means net taxes equal government purchases minus the budget deficit. So in Wiland, net taxes are 60 - 25, which is 35 billion bonts.
e) The private sector balance is saving minus investment. Saving is GDP minus net taxes minus consumption. In Wiland, saving is 320 - 35 - 200 = 85 billion bonts. So the country's private sector balance is 85 - 80 = 5 billion bonts, that is, a surplus of 5 billion bonts.

Answer to Question 2

D