China is a large open economy with an extraordinarily high saving rate
If, as seems likely, there is a decrease in desired saving in the coming years, what effects should we expect to see on China's trade balance (net capital flow), domestic real interest rate, and actual levels of saving and investment?
A decrease in desired saving leads to a decrease in the trade balance (net capital outflow), and an increase in the domestic real interest rate. The higher interest rate will prevent actual saving from falling as much as it would otherwise, but actual saving does decline. The higher interest rate causes actual investment to decline, reducing the size of the decline in the trade balance (net capital outflow).
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According to opportunity-cost theory, if more people learned how to repair their own automobiles, the wages of automotive mechanics would
A) decline as the highest-cost mechanics left the business. B) decline, because the marginal quality of the services provided would go down. C) not change because no change has occurred in demand or supply. D) rise, because mechanics would have to obtain more per hour to maintain their incomes. E) rise in order to compensate for the smaller demand.
Which of the following is the equation for determining an expected value?
A. (1 - Risk factor) × PDV. B. (1 - Risk factor) ÷ PDV. C. (Risk factor - 1) × PDV. D. (Risk factor - 1) ÷ PDV.
Generally, as the size of a firm increases:
A. monitoring costs increase. B. economies of scope fall. C. team spirit increases. D. marginal productivity rises.
"Last month unemployment fell to 4 percent, its lowest level in years. The economy is growing rapidly, but consumer prices have risen at an annual rate of 10 percent during the last six months." Which of the following policies would be most appropriate under these circumstances?
A. an increase in both government spending and taxes B. an increase in taxes C. a reduction in taxes D. an increase in government spending