When does it make sense to run a trade deficit?
a. It never makes sense because a trade deficit is the same as borrowing, which hurts the economy.
b. It makes sense when the financial inflow is used to pay for projects with short-run pay-offs, such as summer camps.
c. It makes sense when the financial inflow is used to pay for projects with long-run pay-offs, such as the U.S. highway system.
d. It does not make sense unless the majority of people in the economy want to go into debt.
c. It makes sense when the financial inflow is used to pay for projects with long-run pay-offs, such as the U.S. highway system.
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In the above figure, what is the marginal cost of the 4th pizza?
A) $0 B) $4 C) $9 D) $36 E) 4 pizzas
The figure above shows the costs for the typical grower in the perfectly competitive turnip market. Currently, the price is $1,000 for a ton of turnips. In the long run, the market supply of turnips will ________
A) decrease and the price of a ton of turnips will fall to $600 B) increase and the turnip grower's economic profit will increase C) increase and the turnip grower's economic profit will decrease D) decrease and the price of a ton of turnips will rise to $1,200
When government spending is completely crowded out, the economy must have
A) perfect capital mobility. B) floating exchange rates. C) both A and B. D) broken the rules. Government spending cannot be completely crowded out.
Forward transactions would be useful to
A) a government wanting to know the size of its future debt. B) a household wanting to reduce its future tax liability. C) a business wanting to know the cost of its funds on future loans. D) a business wanting to expand its operations in overseas markets.