Complete Answer Guide for Solution Manual for International Macroeconomics, 4th Edition, Robert C. Feenstra
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Solution Manual for International
Macroeconomics, 4th Edition, Robert
C. Feenstra
Full download chapter at: https://testbankbell.com/product/solution-manual-
for-international-macroeconomics-4th-edition-robert-c-feenstra/
1. Discovering Data In this problem you will use data from the Bureau of Economic
Analysis (BEA) to investigate the dependence of the United States on foreign markets
over time. Go to the BEA website at www.bea.gov and under the “National” tab open the
interactive table for “GDP and the National Income and Product Account (NIPA)
Historical Tables.” Open Table 4.1 for “Foreign Transactions” and download the data
going back to 1969.
a. The current account is the difference between “current payments to the rest of the
world” and “current receipts from the rest of the world.” What is the latest estimate of
the current account?
Answer: After downloading the data for the “Foreign Transactions” table of the BEA
National Income and Product Accounts and subtracting “current payments to the rest
of the world” from “current receipts from the rest of the world,” we see that the
current account in the most recent year of available data (2015) is −$477.4 billion.
This is a current account deficit, meaning that the United States has a net outflow of
payments to the rest of the world.
b. Create a graph that shows: Current receipts, Current payments, and Current
account over time.
Answer:
Payments, Receipts, and the Current Account
(Retrieved: March 2016)
5000
4000
3000
2000
1000
0
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
-1000
-2000
Answer: The current account was largest (in absolute size) in 2006 when it was
−$802.2 billion. It hovered close to zero and did not begin a significant
downward and negative trend until the early 1990s. Since its peak in 2008, the
current account has remained more or less flat around −$450 billion. The
trends in receipts and payments has been moving much more steadily upward over
the period since the 1970s, with contractions only during recessions.
d. The United States current account deficit grew significantly from the 1990s up
until the financial crisis of 2008. In principle, this growth could have occurred
because of falling receipts from abroad or increasing payments to foreign countries,
or both. Which factor appears to have driven the growth in the current account deficit
in this period?
Answer: Over this period both payments to abroad and receipts are rising. Since
rising receipts from abroad would lessen the current account deficit, it must be the
case that payments to the rest of the world must be rising at a faster rate. This is what
has driven the increase in current account deficit over this period.
e. What does the evolution of the three trends you plotted in part (b) tell you about the
reliance of the United States on foreign markets? Does the country appear to be
growing more open or more closed over time?
Answer: These trends indicate a greater reliance of the United States on foreign
markets. Even if the current account were balanced (it is not), the steady increase in
both receipts from and payments to abroad show a country whose volume of trade
with the rest of the world is growing and is becoming more dependent on both foreign
goods to consume as well as income received from the foreign consumption of
domestically produced goods. To know more accurately how reliant we have become,
one would want to look at these trends as a percentage of United States GDP.
3. Visit the Financial Times website to download data for country risk today. (Hint: Try
searching for “Data Archive Financial Times” to find the Data Archive web page;
then look for “FT500, Fixed incomes, Commodities, Interest rates.”) You may need
to download the most recent daily report (pdf) for interest rates, and look for the table
containing high-yield emerging market rates. Which three emerging market countries
have the highest spreads on their U.S. dollar debt? Which three have the lowest?
Answer: Answers will depend on the latest data update. The spread also depends on
the date of maturity for these bonds. In the sample of countries in the Financial
Times data found at https://markets.ft.com/data/bonds in the “Market rates” table for
February 2016, the three highest spreads are Russia (10%), South Africa (6.50%),
and India (6.05%). The three lowest spreads are Hong Kong (0.02%), the United
Kingdom (0.05%), and Singapore (0.15%). The Financial Times has discontinued
the original emerging markets table used, so both emerging and developed
economies appear in the “Market rates” table. To see a more comprehensive list
of sovereign bond spreads, visit https://www.bloomberg.com/markets/rates-bonds.
4. The charts below show the growth of real GDP per capita in three pairs of
geographically adjacent countries: North and South Korea, Argentina and Chile,
Zimbabwe and Botswana (using data from the Penn World Table).
a. Which country in each pair experienced faster growth in GDP per capita? Which
one is now richest?
Answer: South Korea experienced faster growth than North
Korea. Argentina experienced faster growth than Chile between 1970 and
1980, but Chile’s growth rate was higher than Argentina’s between 1980
and 2000. Botswana has grown faster than Zimbabwe since 1970. As of
2006, the richest countries in each pair are South Korea, Chile, and
Botswana. Of the three, South Korea is the richest.
b. The World Bank’s World Governance Indicators for each country in 2000 were as
shown in the table (higher is better).Based on these data, do you think institutions
can explain the divergent outcomes in these countries? Explain. Why do you think
it helps to compare countries that are physically contiguous?
Answer: South Korea has consistently higher governance ratings than North
Korea. Similarly, Chile’s are higher than Argentina’s ratings, and Botswana’s are
higher than Zimbabwe’s. Based on the information for these six countries, it
appears as though quality governance is associated with higher economic growth.
5. Visit one of the many websites that list all of the current exchange rates between
different currencies around the world. Try a financial newspaper’s site such as ft.com
(follow the links to “Market Data,” and then “Currencies”), or try websites devoted to
foreign exchange market data such as oanda.com or xe.com (dig down—don’t just
look at the major currency tables). According to these lists, how many distinct
currencies exist around the world today? Are some currencies used in more than one
country?
Answer: Answers will depend on the latest data update. This answer is based on
information obtained from the Market Data section in the Wall Street Journal for
September 2013. The countries are divided into six groups: Africa, Americas, Asia,
the Caribbean, Europe, and Oceania. There are 138 countries listed. Many countries
in the Caribbean and Americas have adopted the U.S. dollar as their currency. The
Eurozone uses the euro, and many countries outside the Eurozone have also adopted
the euro as their currency.
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He afterwards commenced the study of the law, at the desire and
under the guidance of his generous patron, who would naturally
wish to train his pupil to the honorable and useful profession which
he himself adorned. The providence of God may be seen in thus
leading the mind of Mr. Williams to that acquaintance with the
principles of law and government, which qualified him for his duties
as legislator of his little colony.
But he probably soon found that the study of the law was not
congenial with his taste. Theology possessed more attractions to a
mind and heart like his. To this divine science he directed his
attention, and received Episcopal orders. It is stated, that he
assumed, while in England, the charge of a parish; that his
preaching was highly esteemed, and his private character revered.[9]
We have thus recited the traditions which have been current in
Rhode Island. There is undoubtedly some truth in them, though the
story is a little romantic, and may have received some embellishment
in its progress.
Roger Williams entered on public life at an eventful period, when
the national mind was strongly agitated by those political and
religious causes, which had been slowly operating for many years,
and which soon subverted the throne and the Episcopal Church. At
these causes we can do no more than glance.
The Reformation, in England, commenced as far back as the latter
part of the fourteenth century, when Wickliffe taught the pure
doctrines of the Scriptures, and kindled a great light for the guidance
of the people in the path to Heaven, by translating the Scriptures,
for the first time, into the English language. He was, of course,
denounced and persecuted by the Catholic Church, but his doctrines
spread, and though many of his followers were put to death, and the
utmost cruelty was practised, in various ways, to hinder the progress
of the truth, yet the principles of the Reformation were extensively
diffused in England, before Luther and his fellow laborers
commenced their glorious ministry. But no public blow was given to
the papal power in England, till Henry VIII. finding the authority of
the Pope an obstacle to his favorite project of repudiating his wife
Catharine and marrying Anne Boleyn, renounced, in 1534, his
political allegiance to his Holiness.[10] The King was created, by act of
Parliament, the Head of the Church, and the powers which had
previously been claimed and exercised by the Pope, were transferred
to the King. But, while the papal authority was rejected, the
doctrines of Popery were not discarded. The King was a strenuous
believer in transubstantiation, purgatory, sprinkling of holy water,
invocation of saints, and other doctrines and rites of the Catholic
Church. He exacted as implicit a submission to his will as the Pope
himself. Indeed, little more was yet gained, than the substitution of
a Pope in England for a Pope in Rome. Henry was of a temper too
despotic to permit him to be a friend of the Protestant religion. To a
monarch of arbitrary principles, the spirit of Popery is more
congenial than that of the Protestant faith. The Catholic system
requires an unconditional submission to the authority of man. The
first principle of Protestantism is implicit obedience to God alone.
The decisions of Councils and the commands of the Pope bind the
Catholic; the will of God, as it is uttered in the Holy Scriptures, is the
only rule of faith and practice to the true Protestant.
After the death of Henry, his son, Edward VI. ascended the
throne. He was a religious Prince, and a zealous friend of the
Reformation. The Church of England was purified from many
corruptions during his reign, a liturgy was compiled, and the
Protestant religion made a rapid progress in the nation. But some
relics of Popery were still retained, and among others, the vestments
of the clergy. It was deemed indispensable, that the priests should
wear the square cap, the surplice, the cope, the tippet, and other
articles of apparel, which were in use among the Popish clergy.
Some excellent ministers refused to wear these garments, on the
ground that they were associated in the public mind with Popery;
were regarded by many of the people with superstitious reverence,
and ought, consequently, to be rejected with the other corruptions
from which the church had purged herself. It was, unquestionably,
very unwise to retain an appendage of the old system, which tended
to remind the people of the discarded religion, to irritate the minds
of its enemies, while it nourished the attachment to it which some
persons secretly retained, and to suggest the obvious conclusion,
that as the ministers of the new religion resembled so nearly those
of the old, the difference between the two systems was very small.
The effect of wearing the popish garments was so manifestly
injurious to the progress of truth, that the refusal to wear them was
not a trivial scruple of conscience, as it may, at first sight, appear.
But the attempt to enforce the use of them, by severe penalties, and
by expulsion from office, was unjust; and it led to a final separation
of the Protestants themselves into Conformists and Non-Conformists.
After Edward’s death, and the accession of Mary, Popery was
restored, and scenes of barbarous cruelty and bloody persecution
ensued, which have made the name of this Queen infamous. Many
hundreds of the Protestants perished at the stake, or in prison, and
multitudes fled to Germany, Switzerland, and other countries.
The reign of this fierce bigot was happily short, and Elizabeth
succeeded her. The Protestant religion was re-established, and
during her long reign it gained an ascendancy which it has never
since lost. Yet Elizabeth possessed the despotic temper of her father.
She had a fondness for some of the gaudy rites of Popery.[11] She
peremptorily insisted on the use of the clerical vestments, and on a
strict conformity to all the other ceremonies of the church. The final
separation of the Non-Conformists from the Church of England was
thus hastened. Those who had fled from England during the reign of
Mary, returned, on the accession of Elizabeth, bringing with them an
attachment to the purer rites of the Reformed Churches in Holland,
Switzerland and France. Most of these exiles, and of the other Non-
Conformists, were, nevertheless, willing to subscribe to the doctrines
of the Church of England, and to use the liturgy, if they might be
permitted to omit the vestments, the sign of the cross in baptism,
and some other ceremonies. They disliked the pretensions of the
Bishops, and many of them preferred the Presbyterian or
Independent form of Church government. There were, too, some
minor points in the liturgy, to which they objected. But had they
been treated with Christian kindness, and allowed, in the spirit of
mutual forbearance and charity, to neglect those forms, which they
considered as sinful or inexpedient, they would, for the most part,
have remained in the Episcopal Church, and England would have
been spared the manifold crimes and miseries, which issued in a civil
war, and drenched her soil with the blood of her King, and of
thousands of her bravest sons.
But the principles of religious liberty were then unknown. The
Queen, though for a while she treated the Non-Conformists with
indulgence, till her power was fully established, soon announced to
them her sovereign pleasure, that they should submit to all the
ceremonies of the church. Severe laws were passed by an
obsequious Parliament, and enforced, with ready zeal, by servile
Bishops. Every minister who refused to conform to all the prescribed
ceremonies was liable to be deprived of his office; and a large
number of the ablest ministers in the nation were thus expelled and
silenced.[12] In order to enforce the laws with the utmost rigor, a new
tribunal was erected, called the Court of High Commission,
consisting of Commissioners, appointed by the Queen. This Court
was invested with power to arrest ministers in any part of the
kingdom, to deprive them of their livings, and to fine or imprison
them at the pleasure of the Court. “Instead of producing witnesses
in open court, to prove the charges, they assumed a power of
administering an oath ex officio, whereby the prisoner was obliged
to answer all questions the Court should put to him, though never so
prejudicial to his own defence. If he refused to swear, he was
imprisoned for contempt; and if he took the oath, he was convicted
upon his own confession.”[13] By this Protestant Inquisition, and by
other means, one fourth of the preachers in England are said to
have been under suspension. Numerous parishes were destitute of
preachers, and so many were filled by illiterate and profligate men,
that not one beneficed clergyman in six was capable of composing a
sermon.[14] Thus were learned and pious ministers oppressed, merely
for their conscientious scruples about a few ceremonies, their
families were ruined, the people were deprived of faithful teachers,
the progress of truth was hindered, the papists were gratified, and a
state of irritation was produced in the public mind, which led, in a
succeeding reign, to the disastrous issue of a bloody civil war.
Nor was the edge of this intolerance turned against the clergy
alone. The people were rigorously required to attend regularly at the
parish churches.
Measures like these gradually alienated the affections of many
from the Established Church, and convinced them, that there was no
prospect of obtaining toleration, or of effecting a further reform in
the church. They accordingly separated from it, and established
meetings, where the ceremonies were not practised. These Non-
Conformists were called Puritans, a term of reproach derived from
the Cathari, or Puritans, of the third century after Christ. The term,
however, was not inappropriate, as it intimated their desire of a
purer form of worship and discipline in the church. It was afterwards
applied to them on account of the purity of their morals, and the
Calvinistic cast of their doctrines.
This separation occurred in the year 1566. The storm of royal and
ecclesiastical wrath now beat the more fiercely on the heads of the
Puritans. The history of England, for the succeeding century, is a
deplorable narrative of oppression, bloodshed and indescribable
misery, inflicted on men and women, of deep piety and pure lives,
but guilty of claiming the rights of conscience, and choosing to
worship God with different forms from those which the National
Church prescribed. No man, of right feelings, can read Neal’s History
of the Puritans, without sorrow and indignation. Every man ought to
read it, if he would understand the reasons why the founders of this
country left their native land, to seek an asylum in the wilderness,
and if he would rightly estimate the great principles of religious
liberty which Roger Williams maintained and defended.
The accession of James I. excited the hopes of the Puritans. He
had been educated in the principles of the Reformation, and had
stigmatized the service of the Church of England as “an evil said
mass in English.”[15] He had promised, that he would maintain the
principles of the Church of Scotland while he lived. But he changed
his principles or his policy, after he ascended the throne of England.
He then announced the true royal creed, No Bishops, no King. He
treated the Puritans with contempt and rigor, declaring that they
were a sect “unable to be suffered in any well-governed
commonwealth.”[16] Many of the Puritans, finding their situation
intolerable at home, left the kingdom for the continent, or turned
their eyes to America for a refuge from persecution.
In the midst of these scenes, Roger Williams was born and
educated. His character impelled him to the side of the Puritans. His
political principles were then, it is probable, as they were throughout
his subsequent life, very liberal; and were entirely repugnant to the
doctrines which were then upheld by the court and the dignitaries of
the church. James was an obstinate and arbitrary monarch, who
inflexibly maintained, in theory and often in practice, those despotic
principles, which led his son to the scaffold, and expelled James II.
from the throne. A mind, like that of Williams, strong, searching and
fearless, would naturally be opposed to the pretensions and policy of
the King.[17] His patron, Sir Edward Coke, incurred the resentment of
James, for his free principles, and his bold vindication of the rights of
the people. Charles I. was, if possible, more arbitrary than his father,
and more disposed to trample on the constitution, and on the rights
of the people.
The tyranny exercised by the Bishops, the severe persecution of
the Puritans, and the arrogant demand of absolute submission to the
National Church, were still more offensive to a man like Mr. Williams.
His principles, as he afterwards expounded them, by his life and in
his writings, claimed for all men a perfect liberty of conscience, in
reference to religion. Such principles, allied to a bold spirit, must
have brought him into notice at such a crisis, and must have
attracted upon his head the storm of persecution. Cotton, Hooker,
and many other ministers, were silenced. In such times, Mr. Williams
could not escape. If he was indeed admitted to a living, it must have
been through the indulgence of some mild Prelate, or by the
influence of some powerful patron. If Cotton and Hooker were not
spared, Williams could not be suffered to preach, for his refusal to
conform seems to have been more decided than theirs.[18]
The same motives, without doubt, which induced others to forsake
their native land for America, operated on the mind of Mr. Williams.
On the 1st of December, 1630, he embarked at Bristol, in the ship
Lyon, Captain William Peirce. His wife accompanied him, a lady, of
whose previous history we are more ignorant than of his own.[19]
There is, however, satisfactory evidence, in her subsequent life, of
her virtues as a wife and a mother. We cannot doubt, that she was
of a kindred spirit with her husband, whose fortunes, both adverse
and prosperous, she shared for half a century.
CHAPTER II.
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