MYECONLAB W/EBK +104 STUDENT PACKET>IC<
17th Edition
ISBN: 9781323761465
Author: HUBBARD/KNAPP
Publisher: Pearson Custom Publishing
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Chapter 18, Problem 18.1.9PA
To determine
The article name is relevant or not for the statements.
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Distinguish 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.
Using the data given in Table 1, compute the net exports. Briefly discuss your result and indicate whether there is a trade surplus or a trade deficit in the current account.
Q-3:
B.
The following graph shows a relationship between saving (S), investment (I) and world interest rate (r*); given that r*> r, where r is domestic interest rate.
Graphically show and interpret the impacts of following policy measures on saving (S), investment (I), and net exports (NX):a) Change in fiscal policy at homeb) Change in fiscal policy abroadc) An increase in investment demand
Chapter 18 Solutions
MYECONLAB W/EBK +104 STUDENT PACKET>IC<
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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- Imagine that the U.S. economy finds itself in the following situation: a government budget deficit of 100 billion, total domestic savings of 1,500 billion, and total domestic physical capital investment of 1,600 billion. According to the national saving and Investment Identity, what will be the current account balance? What will be the current account balance if Investment rises by 50 billion, while the budget deficit and national savings remain the same?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_forwardSuppose that during 2004, country A had exports of goods of $50, imports of goods of $60, exports of servicces plus investment income receipts from abroad of $36, and imports of services plus the sending of payments of investment income abroad of $30. In addition, during 2004, country A made $15 of unilateral transfers abroad and received no unilateral transfers from abroad. Given this information, country A's "balance on current account" in 2004 was a. a $19 deficit b. a $10 deficit c. a $4 deficit d. a $6 surplusarrow_forward
- Catherin 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_forwardSuppose the country of Lilliput exported $145 billion$145 billion worth of goods and imported $423 billion$423 billion worth of goods in the last calendar year. Calculate Lilliput's net exports. $$ billionbillion Lilliput is running neither a trade deficit nor a trade surplus. a trade surplus. a trade deficit.arrow_forwardA1 4a 4. The US has experienced large and growing current account deficits for more than 20 years, whereas Japan has experienced large and growing current account surpluses for roughly the same period. The US economy has grown at faster rates than Japan’s over the past 10 years. a. Use the relationship between the current account and GDP to explain the difference in growth rates between the two economies.arrow_forward
- Question 2(a) Distinguish 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 inflationarrow_forwardBriefly explain whether each of the following statements is true or false. 8. An increase in national saving requires either a rise in investment or an increase in the capital account of the balance of payments.arrow_forwardThe Asian Development Bank (ADB) has warned that a BoP crisis is imminent in Pakistan, if its economy grows more than 3.8% annually without fixing economic imbalances. Pakistan will have to fix its exports and reduce dependency on imports to avoid the next balance of payments crisis. “In the current structural and product specialization circumstances, if Pakistan’s economy is to grow faster than 3.8% in the medium-term, external imbalances will occur,” the report warned. The ADB paper noted that since end-2017, the government has implemented a number of economic reforms to address the BOP crisis, including regulatory measures, reduced imports, increased interest rates, and allowed depreciation of the exchange rate to the US dollar by almost 33%. Despite significant currency depreciation, merchandise exports did not pick up significantly and Pakistan’s total debt and liabilities have risen sharply. On average, over the last decade, Pakistan had lost global market share with foreign…arrow_forward
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