Why do governments prefer to avoid current account deficits that are too large?
What will be an ideal response?
A current account deficit may pose no problem if the borrowed funds are channeled into productive domestic investment projects that pay for themselves with the revenue they generate in the future. However, sometimes, large current account deficits represent temporarily high consumption resulting from misguided government policies or some other malfunctioning of the economy. Sometimes, the investment projects that draw on foreign funds may be badly planned, etc. In such cases, the government might wish to reduce the current account deficit immediately rather than face problems in repaying its foreign debt in the future.
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To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change. B. increase. C. decrease. D. either increase or decrease depending on the relative shifts of AD and AS.
Consider the following data that describe the relationship between income and a tax.IncomeTaxes$20,000$3,40016,0003,00012,0002,4008,0001,6004,000800The tax may be best described as
A. proportional at lower income levels and progressive at higher income levels. B. proportional at lower income levels and regressive at higher income levels. C. regressive at lower income levels and proportional at higher income levels. D. regressive at lower income levels and progressive at higher income levels.
If Sam has $80.00 each week to spend on tacos and magazines, and their respective prices are $.50 per taco and $4.00 per magazine, which of the following equations represents his budget line?
A) $80.00 = $.50/Qt + $4.00/Qm B) $80.00 = Qt/Qm + $.50 /$4.00 C) $80.00 = $.50(Qm) + $4.00(Qt) D) $80.00 = $.50(Qt) + $4.00(Qm)
Advertising is the action of a firm that is intended to maintain the differentiation of its product over time
Indicate whether the statement is true or false