Use the saving and investment equation to explain why the United States experienced large current account deficits in the late 1990s
What will be an ideal response?
Investment in the United States was greater than saving in the late 1990s, so net foreign investment was negative. Net foreign investment equals net exports, which approximately equals the current account balance. Negative net foreign investment implies a current account deficit.
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The Ricardo-Barro effect of a government budget deficit refers to
A) a change in private savings supply. B) a large crowding out effect from a government budget deficit. C) a large crowding out effect from a government budget surplus. D) the international impact of government deficits.
The following would cause an upward shift in the C + I + G + X curve EXCEPT
A) an increase in disposable income. B) an increase in export spending. C) a decrease in import spending D) an increase in household wealth.
What is the difference between Nominal GDP and Real GDP?
a. Real GDP only measures the production of real goods and excludes services of any kind. b. Real GDP is a figure adjusted for exchange rate differences among countries. c. Real GDP is a figure adjusted for inflation. d. There is no difference at all. Real GDP is a synonym for Nominal GDP. e. Real GDP measures goods and services produced within a nation's borders, and nominal GDP measures goods and services produced by domestic resources anywhere in the world
If exchange rates end up in the right ranges, the free market will drive each country to shift resources into those sectors in which it enjoys a comparative advantage.
Answer the following statement true (T) or false (F)