1. Consider a hypothetical global economy consisting of three countries (A, B, C). International trade occurs among these countries. Their bilateral trade of 2020 in goods and services is summarized as follows:

Country A exports to Country B --------------- $100

Country A exports to Country C --------------- $310

Country B exports to Country A --------------- $220

Country B exports to Country C --------------- $430

Country C exports to country A --------------- $150

Country C exports to Country B --------------- $260

a) Compute Country As external trade balance?

b) Compute Country Bs external trade balance?

c) Compute Country Cs external trade balance?

d) Must the global economy as a whole have balanced trade? Why? Or why not?

2. Suppose that in the same year Country As GNP is $1,200, gross domestic private investment is $200, personal consumption is $800, net taxes are $160. Assume that net unilateral transfers are zero. Then:

a) What is its national savings?

b) What is its government savings?

c) What is its domestic absorption?

d) Does Country A need to borrow from the rest of the world? Explain.