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Principles of Macroeconomics (Mind...

7th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781285165912

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BuyFindarrow_forward

Principles of Macroeconomics (Mind...

7th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781285165912
Chapter 19, Problem 1PA
Textbook Problem
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Japan generally runs a significant trade surplus. Do you think this is most related to high foreign demand for Japanese goods, low Japanese demand for foreign goods, a high Japanese saving rate relative to Japanese investment, or structural barriers against imports into Japan? Explain your answer.

To determine
The reason behind the high trade surplus of Japan.

Explanation of Solution

The trade balance of Japan is generally high in trade surplus. The main reason behind this high trade surplus of Japan is the higher rate of savings in Japan. When the savings in Japan is higher, it will increase the national savings of the economy, which is the basic supply of the lonable funds in the economy. The higher supply of funds reduces the interest rate of the economy, and it will increase the net capital outflow of the economy...

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