1. Unit 5 Problem Set Rubric

2. Question #1

3. Question 1 Question A: 5 Points Question B: 5 Point Total
2 Point- Definition of Trade Deficit
2 Points-Definition of Trade Surplus
1 Point- Examples
Question B: 5 Point Total
2 Point- Definition of Current Account
2 Points-Definition of Financial Account
Question C: 5 Point Total
2 Point- Definition of Appreciation
2 Points-Definition of Depreciation

4. Question #2 International Trade

5. Question2 Question A: 5 Points Question B: 5 Point Total
1 Point- To figure it up we add all transactions of goods and services
1 Point- US has a Trade Deficit
1 Point- China has a Trade Surplus
1 Point- US trade deficit is -$500
1 Point- China trade surplus is +$500
Question B: 5 Point Total
2 Point- US current account deficit is -600
2 Point- Chinese current account surplus is +600
1 Point- Add up all the trade of goods and services, foreign aid, and purchases by tourists.

6. Question2 Question C: 5 Points
2 Points- Chinese government is holding $200 of US bonds
1 Point- The US has a current account deficit of negative 600 so they need financial account surplus of +600.
1 Point- Inflows in US are greater than outflow
1 Point- Inflow in China is less than outflow

7. Question2 Question D: 5 Points
1 Point- Chinese will buy cheaper American products
1 Point- Chinese current account will move towards a deficit
1 Point- The US current account will move towards a surplus
1 Point- US Dollar Appreciate
1 Point- Chinese Currency Depreciate

8. Question2 Question E: 5 Points
1 Point- Americans will seek higher Chinese interest rates
1 Point- Chinese financial account will move towards a surplus as inflows increase
1 Point- The US financial account will move towards a deficit as outflows increase
1 Point- US Dollar Depreciate
1 Point- Chinese Currency Appreciate

9. Question #3 FRQs