MACROECONOMICS
14th Edition
ISBN: 9781337794985
Author: Baumol
Publisher: CENGAGE L
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Question
Chapter 19, Problem 4DQ
To determine
To describe: The similarity between problems faced by a country in the concept of balance of payments deficit, and the governments trying to keep up the prices above the equilibrium level.
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Students have asked these similar questions
Over the past four years, the US trade deficit has
increased to $576.9 billion. Based on your
understanding of what it means to have a trade
deficit, is this number too large? Why or why not?
What are the implications for the short-term and
long-term US economy?
Suppose the US goes into a recession where the economy is not growing very quickly (or is actually shrinking) while the economies of our trading partners remain strong. What will most likely happen to our trade deficit? In your answer, explain what will happen to US exports and US imports and why.
In an economy open to trade, must a government budget deficit always be accompanied by an external sector deficit? Why or why not? Could a government budget deficit lead to a government budget surplus?
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- What have been the major causes of the large U.S. trade deficits in recent years? What are the major benefits and costs associated with trade deficits? Explain: “A trade deficit means that a nation is receiving more goods and services from abroad than it is sending abroad.” How can that be considered to be “unfavorable”?arrow_forwardA Senator announces his past support for protectionism. “The U.S. trade deficit must be reduced, but import quotas only annoy our trading partners. If we subsidize U.S. exports instead, we can reduce the deficit by increasing our competitiveness.” Using a three-panel diagram from Chapter 19 in the Mankiw textbook, show the effects of an export subsidy on U.S. net exports, national saving, domestic investment, net capital outflows, the interest rate, and the real exchange rate. Do you agree with the senator?arrow_forwardHow does a growing trade deficit affect a country's GDP? Explain your answer.arrow_forward
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