Discuss the opposing points of view on U.S. trade deficit.
What will be an ideal response?
Those who worry about trade deficits point out that these capital inflows create debts on which interest and principal payments must be made in the future. In this view, Americans have been mortgaging our futures to finance higher consumer spending. But another, quite different, interpretation of the trade deficit is possible. Suppose foreign investors come to see the United States as an especially attractive place to invest their funds. Then capital will flow here, not because Americans need to borrow it, but because foreigners are eager to lend it. The desire of foreigners to acquire American assets should push the value of the dollar up, which should in turn push America’s net exports down. In that case, the trade deficit would still be the mirror image of the capital inflows. But it would signify America’s economic strength, not its weakness.
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Most nations all over the world have raised trade barriers over the past decade.
a. true b. false
Financial markets pay close attention to changes in the federal funds rate because these changes ________.
A. indicate commercial bank lending policies B. indicate the Fed's plans for monetary policy C. directly affect the interest payments on the national debt D. directly affect a large volume of loans
To compute a monthly consumer price index, we need
A) data about consumption habits in every month. B) data about item prices every month. C) fixed exchange rates. D) the GDP or GNP deflator.
The idea that having ownership of an item increases the value that a person puts on the item can be explained by
a. The endowment effect b. Loss aversion c. Overconfident bias d. Anchoring bias