Question

Consider the following information for the nation of Pogo for the year 2020: • Imports of...

Consider the following information for the nation of Pogo for the year 2020:

• Imports of Goods and Services by Pogo Citizens in 2020 = $45B

• Exports of Goods and Services by Pogo Citizens in 2020 = $15B

• Income paid to Foreign Citizens working in Pogo = $10B

• Income earned by Pogo Citizens working in Foreign = $16B

• Pogo citizens own $800B in Foreign assets at the start of 2020. These assets earn 5% interest over the course of the year.

• Foreign citizens own $300B in Pogo assets at the start of 2020. These assets have an 8% rate of interest.

4. What is Pogo’s factor income trade balance (FA) for 2020? Show your work.

5. What is Pogo’s current account trade balance (CA) for 2020? Show your work.

6. Suppose Pogo’s gross domestic product (GDP) in 2020 is $650B. What is Pogo’s GNP for 2020? Show your work.

7. Suppose purchases of new plant and equipment (I) in Pogo in 2020 is $64B. What percent of this new investment spending is, effectively, financed by Foreign? Show your work.

8. What is Pogo’s international net worth at the start of 2021? Show your work.

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Homework Answers

Answer #1

Answer 4:

Pogo's factor income from abroad= Income earned by Pog citizen's working in foreign(16B)+Interest on asset invested in foreign by Pogo(40 or 800*5%)=16B+40B=56B.

Foreign's factor income from Pogo= Income earned by Foreign citizen's working in Pogo(10B)+Interest on asset invested in Pogo by foreign(24 or 300*8%)=10B+24B=34B.

Balance of factor income=56B-34B=22B.

Answer 5:

Pogo's Exports +Pogo's factor income from abroad=15 B+56B=71B

Foreign's Exports to pogo + factor income to abroad=45B+34B=79B.

Balance of current account =71B-79B=-8B.

Answer 6:

GDP=650B

Net Factor income from abroad=22B

GNP=650B+22B=672B.

Answer 7:

If Investment of 64B is in foreign exchange then 8B of it is financed by foreign, i.e 8/64*100=12.5%.

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