Discuss the problems that can arise when a government experiences a chronic budget deficit
Please provide the best answer for the statement.
Budget deficits may lead to economic inefficiency. Government allocation of resources is not always optimal, deficit spending can lead to an over allocation of resources in the government sector. The result of an over allocation in government resources is an under allocation in the private sector. As budget deficits persist a debt crises may occur. If the government debt becomes too large investors may lose faith in the government’s ability and willingness to repay. When investors are no longer willing to lend money to the government experiences a debt crisis.
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A country experiencing an international financial crisis will likely
A) be able to maintain growth and prosperity in its domestic economy, but its export sector will suffer. B) see an increase in foreign direct investment. C) see an increase in portfolio investment. D) encounter difficulty in sustaining its economic growth rate.
The paradox of value can be resolved by distinguishing between
A) quantity demanded and quantity supplied. B) supply and quantity supplied. C) normative and positive statements. D) total utility and marginal utility.
Refer to Table 19-1. Fill in the missing values in the above table. Assume the Big Mac is selling for $4.79 in the United States. Explain whether the U.S
dollar is overvalued or undervalued relative to each of the other currencies and predict what will happen in the future to each exchange rate.
Computers and software programs are
a. inferior goods b. complementary goods c. goods with a cross-price elasticity of demand of 0 d. substitute goods e. perfectly elastic goods