Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Let G stand for government spending, T for taxes, I for private investment, and S for private saving.
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Transcribed Image Text:Complete the following equation for the current account deficit:
Current Account Deficit
=
) + ( _▼
)
Which of the following statements about the current account deficit are correct? Check all that apply.
A current account deficit can push current spending beyond current production.
Using a current account deficit to finance domestic consumption will never be a burden for a nation's economy.
A nation should avoid a current account deficit and associated debt at all costs.
Economic expansions may result in large current account deficits.
Using a current account deficit to increase domestic investment may be beneficial for a nation's economy.
Which of the following could explain why a current account deficit may stimulate an economy?
Foreign purchases of U.S. assets can stimulate the U.S. economy.
Increased imports displace workers in import-competing industries.
Foreign purchases of U.S. securities increase long-term interest rates.
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