Why do governments prefer to avoid excessive current account surpluses? Or, why are growing domestic claims to foreign wealth ever a problem?
What will be an ideal response?
For a given level of national saving, an increased current account surplus implies lower investment in domestic plant and equipment. A few reasons why: first, the returns to domestic savings may be easier to tax than those on assets abroad; second, an addition to the home capital stock may reduce domestic unemployment and therefore lead to higher national income; third, domestic investment by one firm may have beneficial technological spillover effects on other domestic producers that the investing firm does not capture. In addition, the country may in the future find itself unable to collect the money it is owed. Furthermore, countries with large surpluses can become targets for discriminatory protectionist measures by trading partners with external deficits.
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If your income increases, what is the effect on your budget line?
What will be an ideal response?
A quota is a:
a. tax on a specific quantity of imported goods. b. limited number of foreign firms that can sell imported goods. c. restrictive health and safety standard that raises costs. d. tax on domestic producers so that they can make higher profits. e. limit on the quantity of a good that can be imported.
Only final goods and services count in calculating the GDP.
Answer the following statement true (T) or false (F)
The effect time lag is the time period that elapses
A. between when an economic problem manifests itself and it is officially acknowledged. B. between the recognition of an economic problem and implementing policies to solve it. C. between implementing policies to solve an economic problem and when the results of that policy can be measured. D. between the beginning of the budgetary process and the final budget resolution.