The trade deficit is the mirror image of the required capital inflows. So why worry about these capital inflows?
a. Trade deficits automatically cause larger budget deficits.
b. Before long, the Germans, Japanese, and other foreigners will own the United States and will be dictating policy to the U.S. government.
c. These capital inflows create debts on which interest and principal payments will have to be made in the future.
d. During the period of trade deficits, personal consumption must be reduced to build up wealth to repay the debt created.
c
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Refer to Figure 7-2. At the efficient equilibrium
A) economic surplus is zero. B) economic surplus is negative. C) economic surplus is minimized. D) economic surplus is maximized.
Any point on the production possibility frontier is
A) attainable and might be allocatively inefficient. B) attainable and must be allocatively efficient. C) less production efficient than a point in the interior of the PPF. D) always allocatively efficient but might or might not be production efficient. E) always production efficient and always allocatively efficient.
The Consumer Price Index (CPI) measures
A) the prices of a few consumer goods and services. B) the prices of those consumer goods and services that increased in price. C) the average of the prices paid by urban consumers for a fixed market basket of goods and services. D) consumer confidence in the economy. E) the average of the costs paid by businesses to produce a fixed market basket of consumer goods and services.
Refer to Figure 3-2. An increase in the number of firms in the market would be represented by a movement from
A) A to B. B) B to A. C) S1 to S2. D) S2 to S1.