Macroeconomics In The Global Economy

When there is an expected decrease in future income, individuals tend to lower their consumption in order to save more money for the uncertain times ahead. This is because they anticipate a decrease in their ability to afford goods and services in the future. As a result, they prioritize saving more of their current income to create a financial cushion and ensure their future financial security. Therefore, the correct answer is lower consumption and higher saving.

The correct answer is French GDP and German GNI. This is because the income earned by the German citizen while working in France would be included in the calculation of French GDP, as it is a measure of the economic output within the borders of France. On the other hand, the income earned by the German citizen would contribute to German GNI, as it represents the total income earned by German residents, regardless of where it was earned.

The answer states that not all poor countries provide the necessary environment for investment to happen. This suggests that the lack of convergence in GDP per capita among countries over the last 5 decades is due to the fact that some poor countries do not have the conditions or infrastructure in place to attract investment and promote economic growth. Therefore, these countries are unable to catch up with wealthier nations and achieve convergence in GDP per capita.

The correct answer is that money supply in an economy is the result of central bank policy and response of the private sector. This means that the central bank, through its monetary policy, influences the money supply by controlling factors such as interest rates and reserve requirements. The private sector, on the other hand, responds to these policies by deciding how much money to borrow or lend, which affects the overall money supply in the economy. Therefore, money supply is not fixed by the government or simply equal to the number of notes and currency in circulation, nor is it twice as large as GDP.

The statement suggests that regardless of the methodology used (product or expenditures), the estimate of GDP should be the same for all economies. This implies that the two methodologies are consistent and provide reliable estimates of GDP for all economies, regardless of their current account balance, measurement in PPP, or the constancy of inventories.

Based on the given information, the nominal interest rate in Japan is higher than in the US. However, when considering inflation, the real interest rate in the US is lower. Inflation erodes the purchasing power of money, so a negative inflation rate in Japan means that the real interest rate is higher there. On the other hand, the positive inflation rate in the US reduces the real interest rate. Therefore, investors would expect more investment in the US due to the lower real interest rate.

The correct answer is income - consumption - government spending. This is because the supply of loanable funds, or "national saving," is determined by the amount of income that is not consumed or spent by the government. By subtracting consumption and government spending from income, we are left with the amount of funds available for saving and investment.

A high ratio of consumption to GDP can be a barrier to growth unless the country can attract capital from other countries. This is because when the consumption levels are high relative to the GDP, it indicates that the country is spending a large portion of its income on consumption rather than investing in productive activities or saving. This can lead to a lack of funds for investment in industries and infrastructure, which can hinder economic growth. However, if the country is able to attract capital from other countries through foreign direct investment or loans, it can compensate for the lack of domestic savings and investment, thus potentially overcoming the barrier to growth.

The US net foreign asset position deteriorating means that the US has been accumulating more liabilities to the rest of the world than it has been accumulating assets. This implies that the US has been running a capital and financial account surplus, as it has been receiving more capital inflows from foreign investors than it has been investing abroad.

When the currency-to-deposit ratio increases, it means that people are holding a larger proportion of their money in cash rather than depositing it in banks. This leads to a decrease in the amount of money available for banks to lend out, resulting in a decrease in the money supply.