EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 39, Problem 10DQ
To determine
The causes for the US trade deficit , the benefits, and costs of it.
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Students have asked these similar questions
19. In balance-of-payments accounting, the sale of a foreign production facility by a SA firm is a
item in the SA balance of payments; the deposit of funds in a foreign bank account by a SA citizen
item in the SA balance of payments.
Debit; also is a debit
Debit; is a credit
Credit, is a debit
Credit also is a credit
20. The table below shows a section of the national accounts for a small country in 2018. Answer the
question that follows using the information provided in the table.
Consumption expenditure
Government expenditure
9 800
3 500
Depreciation
500
2 200
Exports
Imports
Gross capital formation (investment)
Primary income payments
Primary income receipts
1900
2 500
300
200
The value of Gross Domestic Product (GDP) is:
A 16 100
B 19 900
16 600
15 600
A,
If the U.S. current-account deficit in 2021 is $965.4495 billion,
a. the U.S. capital-account deficit in 2021 will be $965.4495 billion
O b. the U.S. capital-account surplus in 2021 will be $965.4495 billion
O c. we have no way to know, from the information contained in the question, what the U.S. capital-account
will be in 2021
O d. DO NOT CHOOSE THIS ANSWER.
Assume a U.S. firm buys (imports) $5 million (in U.S. dollars) of foreign goods. That transaction by itself increasesthe trade deficit by $5 million. But, the $5 million will flow back to the United States to purchase either (i) U.S. goodsand services or (ii) U.S. assets.• How does the way the $5 million comes back to the United States determine whether there will be balancedtrade or a trade deficit?• How does the U.S. economy benefit from either transaction (the foreign purchase of U.S. goods and services[exports] or the purchase of U.S. assets)?
Chapter 39 Solutions
EP ECONOMICS,AP EDITION-CONNECT ACCESS
Ch. 39.1 - Prob. 1QQCh. 39.1 - Prob. 2QQCh. 39.1 - Prob. 3QQCh. 39.1 - Prob. 4QQCh. 39 - Prob. 1DQCh. 39 - Prob. 2DQCh. 39 - Prob. 3DQCh. 39 - Prob. 4DQCh. 39 - Prob. 5DQCh. 39 - Prob. 6DQ
Ch. 39 - Prob. 7DQCh. 39 - Prob. 8DQCh. 39 - Prob. 9DQCh. 39 - Prob. 10DQCh. 39 - Prob. 11DQCh. 39 - Prob. 1RQCh. 39 - Prob. 2RQCh. 39 - Prob. 3RQCh. 39 - Prob. 4RQCh. 39 - Prob. 5RQCh. 39 - Prob. 6RQCh. 39 - Prob. 7RQCh. 39 - Prob. 8RQCh. 39 - Prob. 9RQCh. 39 - Prob. 10RQCh. 39 - Prob. 1PCh. 39 - Prob. 2PCh. 39 - Prob. 3PCh. 39 - Prob. 4PCh. 39 - Prob. 5P
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Similar questions
- How did large trade deficits hurt the East Asian countries in the mid 1980s? (Recall that trade deficits are equivalent to inflows of financial capital from abroad.)arrow_forwardSuppose that an economy is experiencing large trade deficits. According to pass-through effects, a devaluation would always improve trade balance, when: O both demand for domestic imports and exports are perfectly inelastic. both supply of domestic imports and exports are perfectly inelastic. the demand for domestic imports is perfectly inelastic and the supply of domestic exports is perfectly inelastic. the supply of domestic imports is perfectly inelastic and the demand for domestic exports is perfectly inelastic.arrow_forward8. For this question, assume that equilibrium output is determined in the ZZ - Y diagram. Further assume that policy makers' goals are (1) to achieve balanced trade (i.e. NX = 0 ); and (2) to achieve a target level of output, say Y'. Now, suppose that the initial level of equilibrium output is equal to Y' (ie.,Y = Y") l ofo and that a trade deficit exists at this initial level of output. Which of the following policy actions would most likely enable the policy makers to achieve their two goals simultaneously? A. a reduction in government spending B. convince the country's trading partners to pursue policies what will cause an increase in foreign income (Y*) C. a reduction in taxes D. a simultaneous increase in government spending and reduction in the real exchange rate E. none of the abovearrow_forward
- 14. Consider a country in the two-period analysis of trade imbalances experiencing a trade deficit in period I and no GNP growth between the two periods. Assuming that the country finances its trade deficits through borrowing in period I and repaying the entire loan in period 2 and the extra funds in period I are not directed into domestic investment, which of the following will be observed? a. The average standard of living in the country in period 2 will decline. b. The average standard of living in the country in period I will decline. c. The average standard of living in the country in period 2 will improve. d. The average standard of living in the country in period I will remain unaffected. e. The average standard of living in the country will remain stable over the two periods.arrow_forwardSuppose that national saving is $1568 billion, investment is $1835 billion, and private saving is $1490 billion. How much is the current account balance? Note: current account balance NX+ NFP. O $267 billion O1-267 billion -$221 billion $221 billionarrow_forwardQuestion 12 Other things equal, which of the statements below is false? O a. A trade deficit will keep GDP constant if all imported goods and services are sold at cost in the domestic economy O b. A trade deficit will increase GDP if all imported goods and services are sold at below cost in the domestic economy Oc. A trade deficit will decrease GDP if all imported goods and services are sold at below cost in the domestic economy O d. A trade deficit will increase GDP if all imported goods and services are sold at above cost in the domestic economy rornonsearrow_forward
- this question has three questions . What proportion of this country’s total gross capital formation (or investment) can be financed from national savings, and what part must be financed from external resources? What are the various forms these external resources could take? show in graph how the current account got a deficit of 12% GDP and the budget deficit of 3%. Suppose a country has a large current account deficit (in the vicinity of 12% of GDP). It has a gross capital formation rate of 28% of GDP. The country has an overall budget deficit of 3% of GDP. The share of Household and NPISHs Final Consumption Expenditure is 68% of GDP and that of General Government Final Consumption Expenditure is 12%. What proportion of this country’s total gross capital formation (or investment) can be financed from national savings and what part must be financed from external resources? What are the various forms these external resources could take?arrow_forwardWhat 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_forwardImagine 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_forward
- The country of Nemedia does not trade with any other country. Its GDP is $20 billion. Its government collects $4 billion in taxes and pays out $3 billion to households in the form of transfer payments. Consumption equals $13 billion, and investment equals $2 billion. What is the value of the goods and services purchased by the government of Nemedia? $3 billion O $5 billion $17 billion $19 billionarrow_forward9. Consider a no-trade-to-free-trade liberalization with a pro-competitive effect and the expected theoretical market size and scale effects. However, industrial restructuring is prevented in the short run, because all existing firms are bought by their national governments, which allows all the existing firms to continue operating. Draw the resulting equilibrium picture and illustrate the prices, the number of firms and total sales. What will be the impact on government revenues? What do you expect to happen in the long run, if some of these nations are bigger and richer than others?arrow_forwardThe UK has been running large trade account deficits for many years. According to the equation NX = S+ (T-G) - I, the UK's trade deficit is found to be correlated with O significant rise in public savings but fall in private savings O significant rise in private savings but fall in public savings O significant deterioration in both the private and public savings for many years O significant rise in investmentarrow_forward
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