EBK ECONOMICS: PRINCIPLES AND POLICY
13th Edition
ISBN: 8220100605932
Author: Blinder
Publisher: Cengage Learning US
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Chapter 36, Problem 4DQ
To determine
The similarity between the problems of a country faced with a balance of payments deficit and those posed by a government regulation.
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Over the past four years, the US trade deficit has
increased to $576.9 billion. Based on your
understanding of what it means to have a trade
deficit, is this number too large? Why or why not?
What are the implications for the short-term and
long-term US economy?
Suppose the US goes into a recession where the economy is not growing very quickly (or is actually shrinking) while the economies of our trading partners remain strong. What will most likely happen to our trade deficit? In your answer, explain what will happen to US exports and US imports and why.
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?
Chapter 36 Solutions
EBK ECONOMICS: PRINCIPLES AND POLICY
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- What is a trade deficit? a) When a country exports more goods than it imports b) When a country's imports and exports are balanced c) When a country imports more goods than it exports d) When a country has no international tradearrow_forwardThe value of dollars in the market for foreign-currency exchange (falls, rises) as a result of this export subsidy. True or False: The export subsidy reduces the trade deficit.arrow_forwardUnder what conditions will a larger budget deficit cause a trade deficit?arrow_forward
- The most recent trade data can be found on the BEA site. (Links to an external site.) It shows that since the beginning of the pandemic, the U.S. trade deficit has increased decreased stayed about the samearrow_forwardImports, exports, and the trade balancearrow_forwardSketch a diagram of how a budget deficit causes a trade deficit. (Hint: Begin with what will happen to the exchange rate when foreigners demand more U.S. government debt.)arrow_forward
- What have been the major causes of the large U.S. trade deficits in recent years? What are the major benefits and costs associated with trade deficits? Explain: “A trade deficit means that a nation is receiving more goods and services from abroad than it is sending abroad.” How can that be considered to be “unfavorable”?arrow_forwardA Senator announces his past support for protectionism. “The U.S. trade deficit must be reduced, but import quotas only annoy our trading partners. If we subsidize U.S. exports instead, we can reduce the deficit by increasing our competitiveness.” Using a three-panel diagram from Chapter 19 in the Mankiw textbook, show the effects of an export subsidy on U.S. net exports, national saving, domestic investment, net capital outflows, the interest rate, and the real exchange rate. Do you agree with the senator?arrow_forwardIf a country's economic data shows that private savings equal $300 million, government spending equals $400 million, taxes equal $300, and the trade surplus equals $100 million, then what does investment equal? (Enter 1 for 1 million)arrow_forward
- Any help with number 4, 5 and 6 pleasearrow_forwardWe may use the diagram below (Figure 2, panel (a)) to assess whether trade deficits are bad. Use the diagram to explain whether (or when) trade deficits are bad.arrow_forwardYou work for a Nova Scotia Company trying to successfully enter the cranberry market in Australia. Analyze the entry country (Australia) based on the following; What are the major exports, dollar value, and trends? What are the major imports, dollar value, and trends? Does the entry country have a surplus or deficit for trade? What are the exchange rates? Are there any restrictions on currency trade? You should also consider sweat shops, skilled labor, employee unrest, political and social activists and labor unions in your analysis.arrow_forward
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