Initially trade between Australia and the United States is balanced. Then, if a change in the exchange rate increases the U.S. dollar price of Australian goods, ceteris paribus, we would expect
A. a trade deficit in both countries.
B. a trade deficit in Australia.
C. a trade deficit in the United States.
D. a trade surplus in the United States.
Answer: C
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Indicate whether the statement is true or false
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Indicate whether the statement is true or false
Suppose the federal government doubles the gasoline tax. The deadweight loss associated with the tax
a. also doubles. b. triples. c. quadruples. d. rises by a factor of 8.
People sometimes worry that American trade with other countries will lead to large U.S. trade deficits and the movement of massive amounts of American capital out of the country. This worry is unfounded because countries cannot
A) increase savings at the same time that a trade deficit grows.
B) spend more than they earn.
C) invest more than they save.
D) have both current account and financial account deficits at the same time.
E) increase their trade with other countries without increasing their savings.