In 20XX, the United Kingdom's economy exported goods worth £192 billion and services worth another £77 billion. It imported goods worth £225 billion and services worth £66 billion. Receipts of income from abroad were £140 billion while income payments going abroad were £131 billion. Government transfers from the United Kingdom to the rest of the world were £23 billion, while various U.K government agencies received payments of £16 billion from the rest of the world. • a. Calculate the U.K. merchandise trade deficit for 20XX. . b. Calculate the current account balance for 20XX. • c. Explain how you decided whether payments on foreign investment and government transfers counted on the positive or the negative side of the current account balance for the United Kingdom in 20XX. 2. Occasionally, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Is this possible? (12 Points) 3. Consider an economy described by the following equations: o Y=C+I+G Y = 5,000 G = 1,000 T = 1,000 C = 250 +0.75(Y-T) I = 1,000 - 50 r. • a. In this economy, compute private saving, public saving, and national saving. • b. Find the equilibrium interest rate. • c. Now suppose that G rises to 1,250. Compute private saving, public saving, and national saving. d. Find the new equilibrium interest rate.
