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Chapter 23: Q. 6 (page 575)

The GDP for the United States is \(18,036 billion and its current account balance is –\)484 billion. What percent of GDP is the current account balance?

Short Answer

Expert verified

2.68%

Step by step solution

01

Step1. Introduction

The current account of a nation shows the value of trade in goods and services along with the flow of income and aid. Balance in current account means that the nation is receiving the same amount of money it is sending.

02

Step2. Calculation

Current Account balance is calculated a percentage of GDP, by taking a ratio of the two and multiplying by 100, as calculated below:

Currentaccountbalanceas%ofGDP=CurrentAccountBalance/GDP=484/18036=2.68%

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Most popular questions from this chapter

Does a trade surplus mean an overall inflow of

financial capital to an economy, or an overall outflow of

financial capital? What about a trade deficit?

Many think that the size of a trade deficit is due to a lack of competitiveness of domestic sectors, such as autos. Explain why this is not true.

How does the bottom portion of Figure 23.3, showing the international flow of investments and capital, differ from the upper portion?

State whether each of the following events involves a financial flow to the Mexican economy or a financial flow out of the Mexican economy:

a. Mexico imports services from Japan

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c. U.S. investors receive a return from past financial investments in Mexico

Imagine that the economy of Germany finds itself in the following situation: the government budget has a surplus of 1%of Germany’s GDP; private savings is 20%of GDP, and physical investment is 18%of GDP.

a. Based on the national saving and investment identity, what is the current account balance?

b. If the government budget surplus falls to zero, how will this affect the current account balance?
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