Why is it important, for an open economy, that investment not be consistently higher than saving?
What will be an ideal response?
When investment is higher than saving, the difference is a net capital inflow. The extra investment that is financed by foreigners is an addition to their wealth, rather than an increase in the wealth of domestic citizens. The income from such investment must be paid to the foreign owners, thus is not available to contribute to domestic income and saving. The source of the capital inflow is a continual excess of imports over exports (negative trade balance). Imports are being financed through the sale of assets to foreigners. It is not so much investment but consumption that is unsustainably high; saving is unsustainably low.
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In 2010, the Center for Disease Control has recommended that every child between the ages of 6 months and 18 years be vaccinated,
except those with a serious egg allergy. Dr. Berreman states,"By protecting ourselves from flu, we also protect our families and neighbors." Which is a solution that could be used to achieve a more efficient allocation of resources in the presence of this externality? A) The government could tax the producers of the flu vaccine. B) The government could tax the consumers of the flu vaccine. C) The government could offer a free flu vaccine clinic. D) The government could increase the price of flu vaccines.
Markets in which funds are transferred from those who have excess funds available to those who have a shortage of available funds are called
A) commodity markets. B) fund-available markets. C) derivative exchange markets. D) financial markets.
The term inflation is used to describe a situation in which
a. the overall level of prices in the economy is increasing. b. incomes in the economy are increasing. c. stock-market prices are rising. d. the economy is growing rapidly.
Which one of the following statements regarding transferable pollution permits is false?
a. An equilibrium permit price will be obtained through the trading of permits b. Polluting firms generally prefer emissions standards to a system of tradable permits c. A system of tradable permits was set up under the 1990 Clean Air Act Amendments d. A system of tradable permits could be used to help reduce carbon dioxide emissions e. A system of tradable permits achieves a given level of pollution reduction at the lowest cost