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Chapter 29: Problem 5

In 2016, domestic investment in Japan was 23.4 percent of GDP, and Japanese national saving was 27.2 percent of GDP. What percentage of GDP was Japanese net foreign investment?

Short Answer

Expert verified
Japanese net foreign investment was 3.8 percent of GDP in 2016

Step by step solution

01

Understand the relationship

Net foreign investment is the difference between national saving and domestic investment. Mathematically, this can be expressed as: Net Foreign Investment = National Saving - Domestic Investment.
02

Substitute the known values

In this case, we have that National Saving is 27.2 percent of GDP and Domestic Investment is 23.4 percent of GDP. Substituting these values into our formula, we get: Net Foreign Investment = 27.2 - 23.4.
03

Calculate the result

Completing the subtraction gives us: Net Foreign Investment = 3.8. Therefore, the Japanese net foreign investment was 3.8 percent of GDP in 2016.

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Most popular questions from this chapter

The late economist Herbert Stein described the accounts that comprise a country's balance of payments: A country is more likely to have a deficit in its current account the higher its price level, the higher its gross [domestic] product, the higher its interest rates, the lower its barriers to imports, and the more attractive its investment opportunities - all compared with conditions in other countries-and the higher its exchange rate. The effects of a change in one of these factors on the current account balance cannot be predicted without considering the effect on the other causal factors. a. Briefly describe the transactions included in a country's current account. b. Briefly explain why, compared to other countries, a country is more likely to have a deficit in its current account, holding other factors constant, if it has each of the following. i. A higher price level ii. An increase in interest rates iii. Lower barriers to imports iv. More attractive investment opportunities

If a country saves more than it invests domestically, what must be true of its net foreign investment?

A 2017 article in the Wall Street Journal noted, "President Donald Trump said Wednesday the U.S. dollar 'is getting too strong' and he would prefer the Federal Reserve keep interest rates low." Is there a connection between the president's two observations about economic policy? Briefly explain.

Briefly explain whether you agree with the following statement: "Because in 2016 national saving was a larger percentage of GDP in the United States than in the United Kingdom, domestic investment must also have been a larger percentage of GDP in the United States than in the United Kingdom."

What is the relationship among the current account, the financial account, and the balance of payments?
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