Use the following information on a hypothetical economy, Rijkdom, for the year 2006:

a. Calculate Rijkdom’s financial account balance. What has happened to Rijkdom’s foreign asset position? Explain in detail in terms of Rijkdomian assets and foreign assets (owned by Rijkdomians and foreigners).

b. Calculate the official settlements balance for Rijkdom. Did the central bank of Rijkdom experience a decrease or an increase in its foreign reserve holdings? Explain this in terms of the figure you calculated and what the official settlements balance measures.

c. Calculate net factor income from abroad for Rijkdom. How much did Rijkdomian factors abroad earn?

d. Is Rijkdom a net lender or a net borrower? Explain how you know.

Transcribed Image Text:

Balance of Payments Accounts Current account surplus of $1 billion Nonreserve financial account deficit of $850 million National Income and Product Accounts GNE of $8 billion ($8,000 million) Consumption of $5 billion ($5,000 million)