Explain what economists mean when they say that the United States is a net debtor nation. Identify a potential problem and a positive aspect associated with this status.
What will be an ideal response?
The United States is a net debtor nation because foreigners own more U.S. assets (e.g., stocks, bonds, and property) than U.S. citizens own abroad. A potential problem associated with this status might occur if foreign investors decide to sell their U.S. assets. This would cause a serious devaluation of the dollar and resultant problems in the domestic economy (e.g., inflation). On the other hand, the fact that investment in the United States is attractive to foreigners is an indication of foreign confidence in the U.S. economy. This investment also increases our economic growth potential.
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Refer to the above table. The table gives the combinations of real disposable income and real consumption for a college student for a year. What is the value of the average propensity to save equal when real disposable income equals $14,000?
A) 1.1 B) 0.91 C) 0.09 D) 0.7
A firm in a monopolistically competitive market makes no economic profit in the long run because
A. long-run marginal cost will be too high to make any economic profit. B. long-run price will be equal to long-run marginal cost. C. long-run marginal cost will be equal to long-run marginal revenue. D. long-run price will be equal to long-run average cost.
If the consumer price index (CPI) in Year X was 300 and the CPI in Year Y was 325, the rate of inflation for Year Y was:
A. 325 percent. B. 25 percent. C. 5 percent. D. 8 percent.
The response of investment spending to an increase in the government budget deficit is called
A) private dissaving. B) expansionary investment. C) income minus net taxes. D) crowding out. Figure 21-5