Balance of Payments (34 pts) Below is the Balance of payment of Uzbekistan published by the Central Bank in 2019 and 2020. Answer the following questions based on the data given in the table: (e b) (16 pts/2pts each) Calculate current account, financial account, BOP and official reserves balance in the table. (8 pts) Highlight the key insights from the balance of payment of Uzbekistan for 2019 and 2020, i.e discuss how current account, c) financial account and overall BOP have changed over two years. (10 pts) Provide possible explanations for such a change in CA and FA of BoP, and discuss the possible implications of that change for exchange rate of UZS relative to other currencies (USD for example) and foreign trade of Uzbekistan. If Uzbekistan strives for achieving positive CA, what monetary actions are likely to follow these changes in Bop? Items of Bop 2019 (base year) 2020 Export of goods 13899 12832 Export of services 3095 1700 Import of goods 21190 19048 Import of services 5361 3511 Income received by foreigners 2957 1583 Income paid to foreigners 2220 1774 Unilateral transfers 5455 5212 Direct investment assets 11 Portfolio investment assets Other investment assets 2627 5266 Direct investment liabilities 2317 1732 Portfolio investment liabilities 1346 1389 Other investment liabilities 5444 7677 Financial derivatives: liabilities Net errors and omissions 1953 1137 Current account balance Financial account BOP OR 11. Real exchange rates (32 pts) Suppose the nominal exchange rate is, et/s = 0.75. In England a postcard is priced at $3.60. In the U.S. a postcard is priced at $5. a. (4 pts) What is the US real exchange rate Eus = b. (4 pts) What is the UK real exchange rate Eux =SP 2023, ECON 3720 a. (2 pts) Where is a postcard cheaper (circle)? England U.S. b. (2 pts) At this I will the U.S Import or Export postcards (circle the correct answer)? Export Import c. (4 pts) Will this indicate positive or negative NX for the U.S. and why (circle the correct answer)? Positive Negative d. (2 pts) Is the f over or under valued in nominal terms (circle the correct answer)? Over Under e. (4 pts) What should the nominal exchange rate be for the Law of One Price? ell's = f. (10 pts) In September 2022 pound sterling fell almost 22% against the dollar, the most since 2008, and more than 7% against the euro. It fell by more than 15% in 2016, when the Brexit vote took place (Reuters, 2022). In response to pound depreciation, the Bank of England announced that it will carry out temporary purchases of bonds and postpone the planned start of its gilt (bond) sale programs. Discuss how monetary tightening will affect the exchange rate of pound relative to dollar and euro. Illustrate the effect of this intervention and GBP/USD or/and GBP/EUR exchange rate graphically. III. Short-run macroeconomy (34 pts) As a result of the economic lockdown during Covid-2019 in many countries G has increased and moc has decreased. Given the values below for initial conditions (pre-Covid) and after the changes (where G increased by 50, and moc decreased to 0.75), discuss the consequences of these changes in a short-run open economy, with particular emphasis on international trade. For this you need to a) (3 points each) calculate the components in the table; b) (10 points) discuss changes in total income (Y), Savings and consumption, and trade (IM, X, NX) that took place pre- and post-Covid as a result of fiscal intervention (increase in G): Initial conditions (pre-Covid), USD Changes (post- Covid), USD Investment (1) 150 150 Government Expenditure (G) 200 250 Exports (X) 150 150 Taxes 150 150 mpc 0.95 0.75 mpi 0.15 0.15 G, I, C Multiplier Tax multiplier Consumption Spt Spub Stotal Net export N