Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN: 9781337091985
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 14, Problem 2QR
To determine
Why the budget deficits and the trade deficits are called twin deficits.
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What is the difference between a government deficit and a trade deficit ?
What is the difference between trade deficits and balance of trade?
Why are budget deficits and trade deficits sometimescalled the twin deficits?
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Brief Principles of Macroeconomics (MindTap Course List)
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- How does a growing trade deficit affect a country's GDP? Explain your answer.arrow_forwardWe often hear that trade deficits are bad for a country. Should we agree or disagree with this viewpoint?arrow_forwardDuring the Great Recession there was a large drop in the US trade deficit. There was also a large increase in the US government budget deficit. Are these two facts related? What else must be going on to have a falling trade deficit and a growing government budget deficit at the same time?arrow_forward
- What is a trade deficit?arrow_forwardWhich of the following may not be associated with a deficit? Select one: a. A need to increase borrowings b. Less foreign investment In the deficit economy c. Increased imports d. Lesser capital inflows e. Increased exportsarrow_forwardThe table below includes information on the hypothetical economy of Hersty. Assume the government is running a deficit. Enter the missing values in the table and answer the question below the table. Note that all values are in millions of Herstian dollars. Budget Deficit Investment Spending Private Savings Trade Deficit 2010 125 75 150 2011 110 400 110 2012 650 105 365 The country of Hersty has a budget deficit and trade deficit, a situation referred to as the twin deficits. Which of the following is the most accurate statement about the twin deficits? They are identical twins, always the same size. It is common to see trade and budget deficits increase at the same time. Budget deficits lead to lower interest rates, which encourage foreigners to buy U.S. bonds rather than U.S. goods and services. The twin deficits result in an outflow of foreign financial investment.arrow_forward
- What is the relationship between India's fiscal policies and its current account?arrow_forwardWhat are some reasons to think that America is obligated to help poor countries? What are some reasons to think that America is not obligated to help poor countries? Is foreign aid worsening our budget deficit?arrow_forwardA government decides to introduce an expenditure-switching measure to reduce a balance of trade deficit. Which of the following is an expenditure-switching measure? Pick a,b,c, or d A. A government subsidy to domestic producers B. An increase in income tax C. An increase in the rate of interest D.A decrease in state benefitsarrow_forward
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