Q.1

In 2015, Iceland a Nordic island country has a current account deficit of $1 billion and a nonreserve

financial account surplus of $750 million. The capital account is in a $100 million

surplus. Additionally, Iceland's factories located in foreign countries earn $700 million. Iceland

has a trade deficit of $800 million. Assume Iceland neither gives nor receives unilateral transfers.

Iceland's GDP is $9 billion.

a. What happened to Iceland's net foreign assets during 2015? Did it acquire or lose foreign

assets during the year?

b. Estimate the official settlements balance. What happened to the foreign reserves of the central

bank of Iceland?

c. compute the income foreign factors of production earn in Iceland during 2015?

d. Calculate NFIA.

e. Show that BOP = 0

f. What is gross national expenditure (GNE), gross national income (GNI), and gross national

disposable income (GNDI) of Iceland?