An increase in government spending in a simple open economy leads to Fall in both budget and current account deficit An increase in the budget deficit and a fall in the current account deficit A fall in budget deficit and a rise in the current account deficit An increase in both the budget and current account deficit

An increase in government spending in a simple open economy leads to Fall in both budget and current account deficit An increase in the budget deficit and a fall in the current account deficit A fall in budget deficit and a rise in the current account deficit An increase in both the budget and current account deficit

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter23: The International Trade And Capital Flows

Section: Chapter Questions

Problem 6SCQ: The GDP for the United States is 18,036 billion and its current account balance is 484 billion. What...

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The GDP for the United States is 18,036 billion and its current account balance is 484 billion. What percent of GDP is the current account balance?
Everything else equal, if a country has exports of $15 billion and imports of $16 billion, it follows that the country has a ________. current account deficit and a financial account deficit current account surplus and a financial account deficit current account surplus and a financial account surplus current account deficit and a financial account surplus
Following an expansionary monetary policy, we would expect lower interest rates, dollar a. depreciation, and a decrease in the current account deficit. b. depreciation, and an increase in the current account deficit. c. appreciation, and an increase in the current account deficit. d. appreciation, and a decrease in the current account deficit.
A government finds itself in the following situation: a government budget deficit of $900; total domestic savings of $2000, and total domestic physical capital investment of $1300. According to the national saving and investment identity, if investment increases by $200 while the government budget deficit decreases by $100 and savings remain the same, what will happen to the current account balance?
As domestic currency appreciates, we would expect a. Trade deficit to decrease. b. Trade deficit to increase. c. Imports to decrease. d. Exports to increase.
People sometimes worry that American trade with other countries will lead to large U.S. trade deficits and the movement of massive amounts of American capital out of the country. This worry is unfounded because countries cannot a) have both current account and financial account deficits at the same time. b) increase savings at the same time that a trade deficit grows. c) spend more than they earn. d) invest more than they save.
If our (U.S.) current account is in deficit we are buying foreign financial assets we must have a government budget deficit we are supplying foreigners with our savings we are borrowing from foreigners
Now consider a small open economy, assuming domestic output is held constant and the country initially has a current account deficit. Explain the impact of an increase in government spending on the current account using both words and graphs.
A government uses an expenditure-reducing measure to correct a balance of payments current account deficit. In the short term, what effect would this measure have on consumer expenditure and net exports? Pick a,b,c, or d A) consumer expenditure: increase & net exports: decrease B) consumer expenditure: decrease & net exports: decrease C) consumer expenditure: decrease & net exports: increase D) consumer expenditure: increase & net exports: increase
A net exports deficit will become a surplus if _______. A. the country appreciates its currency B. the government budget deficit is turned into a surplus and the private sector has a surplus C. private saving and government saving exceed private investment D. the private sector surplus adjusts to equal the government sector deficit
Which of the following transactions represents a deficit in the current account of the U.S. balance of payments?A) The Moscow Capital Investment Corporation makes a loan to a U.S. firmB) A U.S. subsidiary exports raw materials to its French parent companyC) U.S. firms and individuals receive dividends on U.S. investments in Latin AmericaD) U.S. tourists in Great Britain purchase pounds sterlingE) Foreigners purchase U.S. securities
If a government increases its budget deficit, which statement would best predict the effects a) Interest rates rise, and the real exchange rate depreciates b) Interest rates fall, and the real exchange rate depreciates c) Interest rates rise, and the real exchange rate appreciates d) Interest rates fall, and the real exchange rate appreciates