ECONOMICS-W/MYECONLAB
7th Edition
ISBN: 9780134833125
Author: Hubbard
Publisher: PEARSON
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Question
Chapter 29, Problem 29.4.5PA
To determine
High interest rate and current account deficit.
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Students have asked these similar questions
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
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.
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
Chapter 29 Solutions
ECONOMICS-W/MYECONLAB
Ch. 29 - Prob. 29.1.1RQCh. 29 - Prob. 29.1.2RQCh. 29 - Prob. 29.1.3RQCh. 29 - Prob. 29.1.4PACh. 29 - Prob. 29.1.5PACh. 29 - Prob. 29.1.6PACh. 29 - Prob. 29.1.7PACh. 29 - Prob. 29.1.8PACh. 29 - Prob. 29.1.9PACh. 29 - Prob. 29.1.10PA
Ch. 29 - Prob. 29.1.11PACh. 29 - Prob. 29.2.1RQCh. 29 - Prob. 29.2.2RQCh. 29 - Prob. 29.2.3RQCh. 29 - Prob. 29.2.4RQCh. 29 - Prob. 29.2.5PACh. 29 - Prob. 29.2.6PACh. 29 - Prob. 29.2.7PACh. 29 - Prob. 29.2.8PACh. 29 - Prob. 29.2.9PACh. 29 - Prob. 29.2.11PACh. 29 - Prob. 29.2.12PACh. 29 - Prob. 29.2.13PACh. 29 - Prob. 29.2.14PACh. 29 - Prob. 29.3.1RQCh. 29 - Prob. 29.3.2RQCh. 29 - Prob. 29.3.3RQCh. 29 - Prob. 29.3.4PACh. 29 - Prob. 29.3.5PACh. 29 - Prob. 29.3.6PACh. 29 - Prob. 29.3.7PACh. 29 - Prob. 29.3.9PACh. 29 - Prob. 29.3.10PACh. 29 - Prob. 29.4.2RQCh. 29 - Prob. 29.4.5PACh. 29 - Prob. 29.4.6PACh. 29 - Prob. 29.4.7PACh. 29 - Prob. 29.4.8PACh. 29 - Prob. 29.5.1RQCh. 29 - Prob. 29.5.2RQCh. 29 - Prob. 29.5.3RQCh. 29 - Prob. 29.5.4PACh. 29 - Prob. 29.5.5PACh. 29 - Prob. 29.5.6PACh. 29 - Prob. 29.5.7PACh. 29 - Prob. 29.1RDECh. 29 - Prob. 29.2RDECh. 29 - Prob. 29.3RDECh. 29 - Prob. 29.4RDECh. 29 - Prob. 29.5RDECh. 29 - Prob. 29.1CTE
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- 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_forwardWhy could a current account deficit stimulate an economy? List at least two reasons and explain with an example for each.arrow_forwardWhat is current account deficit? List down, with detailed explanations, what causes current account deficit in the economy.arrow_forward
- Q)1 Please use the analytical techniques we developed in class to explain how an increase in the Oman government budget deficit will affect the real exchange rate. Be sure to include (A)a graph of the market for loanable funds in Oman, (B) a graph that shows the amount of net capital outflow as a function of the interest rate, and (C) a graph representing the market for foreign currency exchange. Provide a brief written description in addition to the graphs. Q2) From the following table, calculate GDP, GNP, Net national product, National income, Personal income and Disposable personal income In millions of dollarsarrow_forwardThe 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_forward5 List the types of policies that can lead to a current account deficitarrow_forward
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