Macroeconomics Plus MyEconLab with Pearson eText (1-semester access)
6th Edition
ISBN: 9780134435046
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Question
Chapter 18, Problem 18.1.10PA
To determine
The reason behind the substantial foreign debts while the country runs the current account deficit.
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Students have asked these similar questions
Why is a nation with a current account deficit a borrower at that point in time?
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List the types of policies that can lead to a current account deficit
You have the following annual figures for the New Zealand economy.
Investment expenditure $42.5 billion Government savings -$1.7 billion
Many politicians and commentators would like to see continued increases in investment and current account surpluses rather than deficits. If these events are to occur, what else must be happening in the economy?
1. The Government must raise the retirement age.
2. Government spending must fall
3. National savings (private and government) must rise
4. New Zealand must restrict foreign ownership of land and other assets
Chapter 18 Solutions
Macroeconomics Plus MyEconLab with Pearson eText (1-semester access)
Ch. 18 - Prob. 18.1.1RQCh. 18 - Prob. 18.1.2RQCh. 18 - Prob. 18.1.3RQCh. 18 - Prob. 18.1.4PACh. 18 - Prob. 18.1.5PACh. 18 - Prob. 18.1.6PACh. 18 - Prob. 18.1.7PACh. 18 - Prob. 18.1.8PACh. 18 - Prob. 18.1.9PACh. 18 - Prob. 18.1.10PA
Ch. 18 - Prob. 18.2.1RQCh. 18 - Prob. 18.2.2RQCh. 18 - Prob. 18.2.3RQCh. 18 - Prob. 18.2.4RQCh. 18 - Prob. 18.2.5PACh. 18 - Prob. 18.2.6PACh. 18 - Prob. 18.2.7PACh. 18 - Prob. 18.2.8PACh. 18 - Prob. 18.2.9PACh. 18 - Prob. 18.2.10PACh. 18 - Prob. 18.2.11PACh. 18 - Prob. 18.2.12PACh. 18 - Prob. 18.2.13PACh. 18 - Prob. 18.3.1RQCh. 18 - Prob. 18.3.2RQCh. 18 - Prob. 18.3.3RQCh. 18 - Prob. 18.3.4PACh. 18 - Prob. 18.3.5PACh. 18 - Prob. 18.3.6PACh. 18 - Prob. 18.3.7PACh. 18 - Prob. 18.3.8PACh. 18 - Prob. 18.3.9PACh. 18 - Prob. 18.3.10PACh. 18 - Prob. 18.4.1RQCh. 18 - Prob. 18.4.2RQCh. 18 - Prob. 18.4.3RQCh. 18 - Prob. 18.4.4PACh. 18 - Prob. 18.4.5PACh. 18 - Prob. 18.4.6PACh. 18 - Prob. 18.4.7PACh. 18 - Prob. 18.4.8PACh. 18 - Prob. 18.5.1RQCh. 18 - Prob. 18.5.2RQCh. 18 - Prob. 18.5.3RQCh. 18 - Prob. 18.5.4PACh. 18 - Prob. 18.5.5PACh. 18 - Prob. 18.5.6PACh. 18 - Prob. 18.5.7PACh. 18 - Prob. 18.1RDECh. 18 - Prob. 18.2RDECh. 18 - Prob. 18.3RDECh. 18 - Prob. 18.4RDECh. 18 - Prob. 18.5RDE
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Similar questions
- What is the difference between trade deficits and balance of trade?arrow_forwardWhat is current account deficit? List down, with detailed explanations, what causes current account deficit in the economy.arrow_forwardDistinguish between a government deficit and trade deficit? (b) Would you rather live in a nation with a with a high per capita GDP and a low growth rate, or in a nation with a low per capita GDP and a high growth rate? (c) Briefly explain the quantity theory of money and how it is related to inflation. (d) Suppose A&K Sound System is considering building a record studio in Cayman Islands. (i) Assume that A&K Sound System needs borrow money on the bond market. Why would an increase in interest rates affect the decision whether to build the studio? (ii) If A&K Sound System has enough of its funds to finance the new studio without borrowing, would an increase in interest still affect the decision about whether to build the studio? Explain your answer.arrow_forward
- The data in Table 12-1 end in 2011. Visit the U.S. Bureau of Economic Analysis at bea.gov to find information for the latest full calendar year (or for the last four quarters). What is the latest estimate of the size of the annual U.S. current account deficit in billions of dollars?arrow_forward‘According to David Hume’s theory of automatic price adjustment, countries experiencing current account deficit see price levels decrease, making them more competitive and increasing exports. That makes the current account deficit disappear.’. Critically explore this statement and provide examples to confirm or disprove it 'in details with example'.arrow_forwardA 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: increasearrow_forward
- Very short answer question What is meant by deficit in balance of payments?arrow_forwardCatherin Mann (2006), “The Current Account and the Budget Deficit: A Disaggregated Perspective,” in Kopcke, Tootell, and Triest (eds.), The Macroeconomics of Fiscal Policy, MIT Press In the article, Mann notes that the foreign financing of the US current account deficit has increasingly taken the form of foreigners purchasing US Treasury bonds. She is concerned that the increase of foreign holdings of US Treasury bonds may worsen the US current account deficit in the future. Which of the following statements is inconsistent with her reasons behind the concern? a. As global interest rates starts to climb, the overall payments on interest-bearing liabilities (including US Treasury bonds) will rise. b. The interest paid on US government debt (ie, US Treasury bonds) will be increasingly paid to foreign holders, setting up a negative feedback loop between fiscal deficit and current account deficit. c. The greater the US current account deficit, the larger the risk of eventual, sharp…arrow_forwardUnited States currently runs a significant trade deficit with the rest of the world. Research an academic journal article regarding some of our trade balances with specific countries and share what you find. For example, with whom do we run the largest deficits, with whom do we have surpluses, etc.? Do you think it is a problem if we run a trade deficit? Why or why not? In answering, keep in mind what impact a trade deficit has on other parts of our balance of payments.arrow_forward
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