Assignment

1. In Phillipinnes, the trade deficit in 2005, was very large at -5.6% of GDP. But at the end of the day current account matters, and their current account was 1.9% of GDP. So what may be the reason for this?

2. Say that US on average earns from assets abroad 2% a year, and then pays 1% annually for liabilities. If Assets were 100 Billion$, and liabilities are 110 Billion$, what will be the net investment income? What is the net international investment position?

3. Recently euro is getting appreciated against US$, what may be the affect on net investment income of US, keeping else fixed and if US assets were denominated in euros.

4. CA=S-I, read and derive this equation from Chapter 2, where CA is the current account, S is savings and I is investment.