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International monetary trade ecn 606 > chap 5 > Flashcards

chap 5 Flashcards

1
Q

what flows are recorded in the BALANCES OF PAYMENT ACCOUNT ?

A
  • BOP : transactions WITH the rest of the world

BOP = CA + FA + KA

Additionals flows such as cross border flows, etc

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2
Q

what flows are recorded in the NATIONAL INCOME AND PRODUCT ACCOUNT ?

A
  • Transactions WITHIN the home country
  • Aggregate economic activity
  • various points in the circular flow of payments
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3
Q

What is gross national expenditure (GNE) ?

A
  • It is the total expenditure on final goods and services in any given period
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4
Q

Formula for GNE?

A

GNE = C + I + G

C : personal consumption
I : investment
G : government expenditure

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5
Q

what is Gross domestic product (GDP) ?

A
  • It is the value of all (intermediate and final goods) goods and services produced as output by firms
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6
Q

What is Gross national income ?

A
  • It value of all income is paid to domestic entities (in close economy)
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7
Q

what measure you can find in a close economy ?

A
  • GNE
  • GDP
  • GNI
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8
Q

what measure you can find in a open economy ?

A

Current Account (CA) :

  • Trade balance TB (between GNE and GDP)
  • NFIA : Net Factor Income from abroad (between GDP and GNI)
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9
Q

what is trade balances ?

A
  • It is the differences between payments made for imports and payments received for exports
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10
Q

Formula for GDP (open economy)

A

GNE + TB = GDP

the total value of production in the economy

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11
Q

What is NFIA ?

A
  • Net factor income from abroad :

It is the value of factor service export minus factor service

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12
Q

What is NUT ?

A
  • Net Unilateral Transfer :

It equals the value of unilateral transfer the country received from the rest of the world minus those gave to the world

NUT = UTin - UTout

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13
Q

what is unilateral transfer ?

A
  • They are considered non market transactions

such as Gifts : they are different kind of transaction

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14
Q

What is GNDI?

A
  • It is Gross National Disposable income
  • A combination of of GNI and NUT
  • Represent the total income resource available to the home country
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15
Q

what is Current Account (CA) ?

A
  • It is the combination of all international transactions I goods, service and income
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16
Q

What is Financial account (FA) ? (Simplify version)

A
  • The value of assets exports minus seats import

- Net assets export is added to GNDI

17
Q

What is capital account ? (simplify version)

A
  • It is the value of transfers from the rest of the world minus THOSE to the rest world
18
Q

what re the approaches to measuring economic activity ?

A
  • The expenditure approach (look demand for goods ) (GNE)
  • Product Approach (look supply for goods ) (GDP)
  • Income Approach (GNDI) (payments made)
19
Q

Formula for GDP:

A

GDP = C + I + G + ( EX - IM )

C: comsunption

I: investment

G :government

( EX - IM ): TB trade balances

EX: all exports

IM : all imports

20
Q

Formula for GNI:

A

GNI: C + I + G + ( EX - IM ) + ( EXfs -IMfs )

C + I + G: GNE

( EX - IM) : Trade balances

( EXfs -IMfs ) : NFIA

21
Q

Formula for GNDI :

A

GNDI (Y) = GNE + TB + NFIA + NUT

GNDI (Y) = GNI + NUT

GNDI = GNE + CA

22
Q

Formula for National Saving :

A

S = I + CA

S = Y - C -G

23
Q

Formula for Current Account

A

CA = S - I

CA = (Sp + Sg ) - I

24
Q

Formula for Private saving (Sp) :

A

Sp = Y - T - C (after tax)

25
Q

Formula for Government Saving (Sg) :

A

Sg = T - G

26
Q

What is the Financial account (FA) ? (extensive)

A
  • It is the transactions between RESIDENTS and NOT-RESIDENTS (that involve financial assets ) such as :
Real assets (lands and structures) 
Financial assets (bonds, equity and loans)

FA = EXa - IMa

basically it measures how the country accumulate or decumulates

27
Q

What Capital Account cover ? with respect to remaining assets movement

A
  1. Capital transfer (gifts )
  2. The acquisition and disposal of non-financial, non-produced assets (patents , copyrights , trademarks)

KA = KAin - KAout

28
Q

What is External Asset and External liability ?

A
  • External Assets : home hold assets in foreign country

- External liability : foreign hold assets in home country

29
Q

Foreign Assets (FA^) formula:

A

FA^ = (EXha - IMha) + (EXfa - EXfa) (same) (home assets moving into foreign ownership)

(EXha - IMha) : Net Export of HOME assets

(EXfa - EXfa) : Net export of FOREIGN assets

FA^ = (EXha - IMha) - (EXfa - EXfa) (same) (Foreign assets moving into home ownership)

FA = EXa - IMa ( in either way) (Financial account)

30
Q

Formula for extra resources (due trade)

A

Extra resources of home due to all assets trades :

FA + KA

FA : Financial account

KA : Capital account

= ( EXa - IMa ) + ( KAin - KAout )

EXa : Value of all assets exported

IMa : Value of all assets imported

KAin : Capital imported as a gift

KAout : CAPITAL exported as gift

31
Q

Formula BOP identity (balances of payment )

A

0 = CA + KA + FA

FA : Financial account

KA : Capital account

CA : current account

  • FA = CA + KA
32
Q

In what consists the balance of payment ?

A
  • in the Current account : which measure external imbalances ( goods, service, factor service and unilateral tranfers )
  • The financial and capital account measures trade
33
Q

What is ROW ?

A
  • Rest of the world
34
Q

Main reasons for changes in external wealth :

A
  1. Financial Flows :
    - the effect of trade increase and decrease the assets and liabilities
  2. Valuations effects :
    - The value of existing external assets and liabilities
35
Q

Formula for Change in External wealth

A

W = FA + (Valuations effects )

W: Change in external wealth

FA : Financial account

W = ( CA + KA ) + (Valuations effects )

36
Q

In an open economy , GDP is equal to GNE

I that true ?

A

No

37
Q

Can FA be split into different types of transactions ?

A
  • Into OSBA : transaction conducted by banks

- FA non-reserve : transactions conducted by everyone else

International monetary trade ecn 606 (9 decks)

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