Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 27, Problem 10DQ
To determine
The causes for the US trade deficit , the benefits, and costs of it.
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Students have asked these similar questions
Which is an incorrect statement about the balance of payments accounts?
O A. Any transaction involving a flow of funds out of a country is a negative item in the country's balance of payments.
B. The balance of payments accounts consist of the current account and the financial account.
c. The financial account measures a country's trade in currently produced goods and services.
O D. Any transaction involving a flow of funds into a country is a positive item in the country's balance of payments.
Assume a U.S. firm buys (imports) $5 million (in U.S. dollars) of foreign goods. That transaction by itself increasesthe trade deficit by $5 million. But, the $5 million will flow back to the United States to purchase either (i) U.S. goodsand services or (ii) U.S. assets.• How does the way the $5 million comes back to the United States determine whether there will be balancedtrade or a trade deficit?• How does the U.S. economy benefit from either transaction (the foreign purchase of U.S. goods and services[exports] or the purchase of U.S. assets)?
Suppose that national saving is $1568 billion, investment is $1835 billion, and private saving is $1490 billion. How much is the current
account balance? Note: current account balance NX+ NFP.
O $267 billion
O1-267 billion
-$221 billion
$221 billion
Chapter 27 Solutions
Microeconomics
Ch. 27.1 - Prob. 1QQCh. 27.1 - Prob. 2QQCh. 27.1 - Prob. 3QQCh. 27.1 - Prob. 4QQCh. 27.A - Prob. 1ADQCh. 27.A - Prob. 1ARQCh. 27.A - Prob. 1APCh. 27 - Prob. 1DQCh. 27 - Prob. 2DQCh. 27 - Prob. 3DQ
Ch. 27 - Prob. 4DQCh. 27 - Prob. 5DQCh. 27 - Prob. 6DQCh. 27 - Prob. 7DQCh. 27 - Prob. 8DQCh. 27 - Prob. 9DQCh. 27 - Prob. 10DQCh. 27 - Prob. 11DQCh. 27 - Prob. 1RQCh. 27 - Prob. 2RQCh. 27 - Prob. 3RQCh. 27 - Prob. 4RQCh. 27 - Prob. 5RQCh. 27 - Prob. 6RQCh. 27 - Prob. 7RQCh. 27 - Prob. 8RQCh. 27 - Prob. 9RQCh. 27 - Prob. 10RQCh. 27 - Prob. 1PCh. 27 - Prob. 2PCh. 27 - Prob. 3PCh. 27 - Prob. 4PCh. 27 - Prob. 5P
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- If the U.S. current-account deficit in 2021 is $965.4495 billion, a. the U.S. capital-account deficit in 2021 will be $965.4495 billion O b. the U.S. capital-account surplus in 2021 will be $965.4495 billion O c. we have no way to know, from the information contained in the question, what the U.S. capital-account will be in 2021 O d. DO NOT CHOOSE THIS ANSWER.arrow_forwardAn example of a deficit item on the u.s. balance of payments is 1) the sale of a spark plug made by aus. firm in Midigan to a Nissan plant n Tennessee. 2) the payment of a dividend by a British firm to a us, family, O 3) the purchase of Japanese yen by a us, firm, 4) a deposit in a bank in Chicago by the government of Saudi Arabia.arrow_forwardIf Canadian exports of goods and services were $37 billion, imports of goods and services were $42 billion, transfers by Canadians to foreigners were $3 billion and transfers from foreigners to Canadian citizens were $2 billion, then the current account balance would be O A. $4 billion. O B. - $6 billion. O C. $8 billion O D. $6 billion. O E. - $4 billion.arrow_forward
- Which one of the following statements is TRUE? Select one: O a. The more extensive are factor movements, the greater is the loss from a fixed exchange rate. O b. The less extensive are cross-border trade and factor movements, the greater is the gain from a fixed exchange rate. O c. The more extensive are cross-border tráde, the greater is the loss from a fixed exchange rate. Od. The more extensive are cross-border trade and factor movements, the greater is the gain from a fixed exchange rate. Oe. The more extensive are cross-border trade and factor movements, the greater is the loss from a fixed exchange rate.arrow_forwardOther things remaining constant, higher trade deficits in the U.S. will lead to: O a. an increase in domestic savings in the U.S. O b. U.S citizens buying greater foreign securities. c. an increase in funds from abroad. d. a decrease in the demand for U.S. dollars. e. an increase in the standard of living of the U.S residents.arrow_forward2 3. 4 O The balance of trade equals exports minus imports. O Since the inception of NAFTA, U.S. exports to Mexico have grown from $50 billion to $221 billion, while imports from Mexico have risen from $49 billion to $270 billion. During that same period, U.S. exports to Canada have grown from $114 billion to $287 billion, while imports from Canada have risen from $128 billion to $317 billion. Select two trends from the list below that have resulted from the NAFTA agreements: a. Canada's balance of trade with the U.S. has increased. b. Mexico's balance trade with the US has decreased. c. Mexico's balance of trade with the U.S. has increased. d. Net trade between United States and Canada has not changed. e. Net trade between United States and Mexico has not changed. Canada's balance f trade with the US has decreasedarrow_forward
- Consider the following scenario: Soybeans Textiles Country A O 100 O 150 O200 300 3 1 Country B 10 5 Suppose that w, $1000 and e=1 (e is the exchange rate). What is the maximum level of w, (expressed in $) such that these 2 countries trade according to Comparative Advantage?arrow_forward8. For this question, assume that equilibrium output is determined in the ZZ - Y diagram. Further assume that policy makers' goals are (1) to achieve balanced trade (i.e. NX = 0 ); and (2) to achieve a target level of output, say Y'. Now, suppose that the initial level of equilibrium output is equal to Y' (ie.,Y = Y") l ofo and that a trade deficit exists at this initial level of output. Which of the following policy actions would most likely enable the policy makers to achieve their two goals simultaneously? A. a reduction in government spending B. convince the country's trading partners to pursue policies what will cause an increase in foreign income (Y*) C. a reduction in taxes D. a simultaneous increase in government spending and reduction in the real exchange rate E. none of the abovearrow_forwardQuestion 12 Other things equal, which of the statements below is false? O a. A trade deficit will keep GDP constant if all imported goods and services are sold at cost in the domestic economy O b. A trade deficit will increase GDP if all imported goods and services are sold at below cost in the domestic economy Oc. A trade deficit will decrease GDP if all imported goods and services are sold at below cost in the domestic economy O d. A trade deficit will increase GDP if all imported goods and services are sold at above cost in the domestic economy rornonsearrow_forward
- Which of the following would increase the current account balance of the United States? O an increase in the amount of money the U.S. government sends in foreign aid to other countries O an increase in imports an increase in the amount of income U.S. companies pay out to foreigners who own investments in the United States. O an increase in net exportsarrow_forward(Table) The balance of trade is: Balance of Payments (Billions of U.S. Dollars) Component Exports Imports Income received Income payments Net transfers Amount $1,800 2,300 490 540 -100 Increase in foreign-owned assets in the United States 700 Increase in U.S.-owned assets abroad 100 O $500 billion. O-$650 billion. O-$500 billion. O $650 billion.arrow_forwardWhat problem is most directly associated with a trade deficit? O fixed exchange rates O devaluation of a nation's currency O unemployment in import industries. O inflationarrow_forward
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