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In 2012, Opulenza's domestic investment totaled $400 million, resulting in capital gains of $20 million. Opulenza people purchased $120 million of foreign assets during
In 2012, Opulenza's domestic investment totaled $400 million, resulting in capital gains of $20 million. Opulenza people purchased $120 million of foreign assets during the year, and foreigners also purchased $160 million of Opulenza's assets. Suppose that the valuation effect resulted in a total capital gain of $1 million. a. Calculate changes in domestic assets b. Calculate changes in external assets c. Calculate the change in total assets d. How much is the total domestic savings? e. What is the current account? Is it in the red or in the black? f. Explain the imbalance in Opulenza's current account, taking into account savings, capital inflows, and levels of domestic/foreign assets g. If Opulenza's currency is devalued, how will it affect domestic assets, external assets, and total assets, respectively? Suppose that foreign assets owned by the Opulenza people are denominated in foreign currency.
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