Explain why a nation is a borrower if its current account is in deficit at a given point in time.
What will be an ideal response?
POSSIBLE RESPONSE: Because of the concept of double-entry bookkeeping, all of the items in a country's balance of payments must add to zero. For every debit there is an offsetting credit. All of the items other than the current account items are flows of international financial investments, both changes in private and/or nonofficial financial assets in the financial account and changes in official U.S. and foreign financial assets holdings in the international reserve assets account. Therefore, the country's current account balance must equal the increase in the country's foreign financial assets minus the increase in the country's foreign financial liabilities or net foreign investment. If the country has a current account deficit, then its foreign liabilities are growing faster than its foreign assets. If its net foreign investment is negative it is a net borrower.
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The above figure shows the marginal private benefit and marginal social cost of a college education. If society's external benefits from college graduates is $10,000 each, then without government intervention
A) no students will go to college. B) less than 10 million students will go to college. C) 10 million students will go to college. D) more than 10 million students will go to college.
Refer to Table 19-15. Consider the following data on nominal GDP and real GDP (values are in billions of dollars): The GDP deflator for 2015 equals
A) 94.1. B) 105.1. C) 106.2. D) 108.5.
A procyclical variable ________
A) moves up during expansions and down during contractions B) moves up during contractions and down during expansions C) moves in the opposite direction of aggregate economic activity D) all of the above E) none of the above
In the above figure, what is the opportunity cost of one bushel of corn?
A) 1 bushel of soybeans B) 0.5 bushel of soybeans C) 2 bushels of soybeans D) unable to determine