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The net foreign assets (NFA) dynamics equation: NFAt/Yt NFAt-1/Yt-1 + (it-t)NFAt-1/Yt-1 - gtNFAt-1/Yt-1+NXt/Yt . NFAt -net foreign assets, Yt - nominal GDP, it - nominal
The net foreign assets (NFA) dynamics equation: NFAt/Yt NFAt-1/Yt-1 + (it-t)NFAt-1/Yt-1 - gtNFAt-1/Yt-1+NXt/Yt . NFAt -net foreign assets, Yt - nominal GDP, it - nominal interest rate, t - inflation rate, gt - compounded GDP growth rate, NXt - net export, t - year. Each term is referred to as "contribution of". Current account CAt = NFAt - NFAt-1 Flow identity S/Y = I/Y + NX/Y, where S-savings, I- investments Lawson Doctrine Sp+Sg = I + NX, wher Sp=Y-T-C private savings, Sg= T-Ggovernment savings, T-taxes, G-government purchases. Assumed NX=02014 2015 Real GDP growth (annual percent) 3.6 3.9 Inflation (annual percent) 5.2 5.6 Interest rate (nominal, annual percent) 6.3 6.9 Net export (percent of GDP) 3.9 1.7 Net foreign assets (percent of GDP) 4.7 ? Savings (percent of GDP) 21.3 24.5 What is the contribution of the economic growth of 2015 to the NFA-to-GDP ratio of 2015? A. 2.4% B. 0.6% C. -0.2% D. -1.5%
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