The impact of changes in the quality of goods on the economy.

Question

International Finance and the Exchange Rate - End of Chapter Problem At a family gathering, one of your cousins says, "We spend so much more on imports than other countries spend on our exports. It isn't fair, and we should raise tariffs on imports to reduce how much we buy from other countries." How might you explain to your cousin that current account deficits aren't necessarily a sign of economic troubles to come? Our current account deficits mean we obtain cheaper goods than we could otherwise. Most economists agree that an unequal bilateral trade balance is nothing to worry about. Contrary to common belief, the current account deficit does not suggest that we are living beyond our means. The flip side of the current account deficit is a financial account surplus, which could enhance future growth if the foreign spending it entails is directed toward high-quality investments.

Answer 1

Question

Chapter 19, Problem 3PA

Sub part (a):

To determine

The impact of changes in the quality of goods on the economy.

Sub part (b):

To determine

The impact of changes in the quality of goods on the economy.

Sub part (c):

To determine

The impact of changes in the quality of goods on the economy.

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