Macroeconomics (Book Only)
12th Edition
ISBN: 9781285738314
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 24.11, Problem 1ST
To determine
The expansionary fiscal policy in an open economy.
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How could an increase in a nation's fiscal deficit increase its trade deficit?
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Group of answer choices
The country's exports are $150 billion and its imports are $120 billion.
The country's exports are $110 billion and its imports are $140 billion.
The country's exports are $140 billion and its imports are $40 billion.
The country's exports are $120 billion and its imports are $140 billion.
If there is no trade deficit, budget deficit =$500, what is the difference between savings and planned investment in equilibrium?
Chapter 24 Solutions
Macroeconomics (Book Only)
Ch. 24.4 - Prob. 1STCh. 24.4 - Prob. 2STCh. 24.4 - Prob. 3STCh. 24.7 - Prob. 1STCh. 24.7 - Prob. 2STCh. 24.8 - Prob. 1STCh. 24.8 - Prob. 2STCh. 24.10 - Prob. 1STCh. 24.10 - Prob. 2STCh. 24.11 - Prob. 1ST
Ch. 24.11 - Prob. 2STCh. 24 - Prob. 1VQPCh. 24 - Prob. 2VQPCh. 24 - Prob. 3VQPCh. 24 - Prob. 4VQPCh. 24 - Prob. 1QPCh. 24 - Prob. 2QPCh. 24 - Prob. 3QPCh. 24 - Prob. 4QPCh. 24 - Prob. 5QPCh. 24 - Prob. 6QPCh. 24 - Prob. 7QPCh. 24 - Prob. 8QPCh. 24 - Prob. 9QPCh. 24 - Prob. 10QPCh. 24 - Prob. 11QPCh. 24 - Prob. 12QPCh. 24 - Prob. 13QPCh. 24 - Prob. 14QPCh. 24 - Prob. 15QPCh. 24 - Prob. 16QPCh. 24 - Prob. 17QPCh. 24 - Prob. 18QPCh. 24 - Prob. 19QPCh. 24 - Prob. 1WNGCh. 24 - Prob. 2WNGCh. 24 - Prob. 3WNG
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Similar questions
- In an economy open to trade, must a government budget deficit always be accompanied by an external sector deficit? Why or why not? Could a government budget deficit lead to a government budget surplus?arrow_forwardAssume that in 2010, a country had a GDP of $500$500 billion, a budget deficit of $6$6 billion, and a trade deficit of $10$10 billion. In five years, the budget deficit became $4.0$4.0 billion, and the trade deficit as a percentage of GDP changed by 0.70.7 percentage point(s). GDP remained unchanged.Calculate the dollar value of the trade deficit in 2015.arrow_forwardIn a small a small open economy, illustrate how a fiscal expansion (such as an increase in government spending) in the domestic economy can affect the flow of capital and goods in the country.arrow_forward
- Explain how economic populist policies usually lead to overvalued exchange rates and large trade deficits.arrow_forwardWhy are budget deficits and trade deficits sometimescalled the twin deficits?arrow_forwardWhat is a foreign trade deficit or surplus? How does this affectinterest rates?arrow_forward
- Future U.S. deficits could be decreased by options: increasing transfer payments and decreasing interest payments on the debt increasing government expenditures and decreasing taxes decreasing current and future taxes decreasing government expenditures and increasing taxesarrow_forwardThe macroeconomic view of a trade deficit implies that, other things equal, the imposition of a tariff will reduce South Africa's trade deficit A. Because exports will be promoted and imports cannot possibly change B.Because imports will be reduced and exports cannot possibly change C.Only if the tariff has no impact on South Africa's spending or income D.Only if the tariff leads to increased income in South Africa relative to its spendingarrow_forwardExplain the expansionary fiscal policy in the short run and long run (ignoring exchange rate and capital flows).arrow_forward
- The macroeconomic view of a trade deficit implies that, other things equal, the imposition of a tariff will reduce South Africa's trade deficit.arrow_forwardHow could a greater budget deficit increase the trade deficit? What happens to the multiplier if there is an increase in the marginal propensity to consume? What would likely happen to the level of economic activity if the government took the necessary steps to reduce the deficit significantly in a relatively short period of time? When is the most appropriate time to reduce the deficit?arrow_forwardWhich of the following economic reasoning behind the twin deficit theory is not correct?a. According to the national income accounting, if private saving and investment stay constant, a government budget deficit can cause a trade deficit by reducing national saving. b. Government budget deficits (due to expansionary fiscal policy) and trade deficits during the 1980s and early 2000s in the US are the cases of the twin deficits.c. The chain of causality can work in a reverse way: a smaller fiscal deficit leads to a smaller trade deficit, other things being equal.d. All of the above are correct.arrow_forward
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