“Trade deficits are a mixed blessing.” Interpret and elaborate.
What will be an ideal response?
Trade deficits are a mixed blessing because on one hand they allow the United States to increase its level of consumption through imports and debt. However, the large level of debt results in the loss of U.S. assets to foreign countries. To remove the incurred debt and foreign ownership, there may have to be large sacrifices of foreign consumption. However, this outcome is uncertain. For example, foreign investment in the United States increases the U.S. capital stock and this could result in large increases in U.S. production capacity. Together, this allows the United States to increase its GDP and its ability to pay foreign debt and to buy back capital. Thus, the effect of a trade deficit is mixed.
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If Techland's government reduces tax rates, ________
A) the economy's labor demand curve will shift to the left B) the economy's labor supply curve will shift to the left C) the economy's aggregate supply curve will shift to the left D) the economy's labor demand curve will shift to the right
In the figure above, when income equals $20,000, what does consumption equal?
A) $0 B) $10,000 C) $20,000 D) impossible to tell
Suppose workers do not believe the Fed will implement its announced monetary policy plans and the Fed wants to achieve low unemployment. In this situation the Fed would be best off:
a. implementing a policy of high money growth. b. announcing and implementing a policy of low money growth. c. announcing a policy of high money growth and implementing a policy of low money growth. d. following a policy that forces the actual inflation rate to coincide with the expected inflation rate. e. promoting a low rate of inflation and adjusting actual policy plans to economic conditions.
If the government were to remove rent controls from the New York City rental market, then
A) all would be harmony. B) the price paid by buyers would decrease and the quantity of rental units will decrease. C) the price received by sellers would increase and the quantity of rental units will increase. D) the price received by sellers would decrease and the quantity of rental units will decrease.