Homework Answers
The problem of trade deficit and unemployment are intimately related to each other in an economy. When there is a rise in the trade deficit, it means an economy is importing larger than its export. Suc mismatch causes an outflow of domestic jobs or new jobs are created overseas.
Such a problem can be corrected by increasing export and reducing imports, In both cases, the domestic output level would be driven and unemployment would come down.
- Restricting import would reduce the trade deficit now spending on domestic goods would rise. It will drive up employments.
- Depreciating domestic currency would make export competitive and import will become relatively costly. Thus, it would drive up the export and new jobs shall be created at home.
- Further, the domestic producers must be incentivised to compete against the overseas products.
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Subscribe The topic: Assume an open, mixed economy. That is, foreign trade is part of the...
Subscribe The topic: Assume an open, mixed economy. That is, foreign trade is part of the economy, and the economy includes both a public (government) and a private (consumers and businesses) sector. Given this, aggregate demand is expressed as (C + I + G + X). Assume the MPC is .7. Assume a stimulus package of $100 billion has been approved by Congress and the money has been spent. In order to pay for those expenditures, Congress also approved a...
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Suppose Country X is a small open economy with a huge trade deficit. Recently, her government suggests a reduction in income tax. Using the Classical Theories, explain what will happen to net capital outflow and real exchange rate in the long run. Explain the impact on the size of her trade deficit.
Problem 3. Protectionism. Consider an open economy experiencing a trade deficit. The current president desires to elimitate the trade deficit. The president considers three policies: Policy 1: Impose restrictions on imports (such as quotas). Policy 2: Provide domestic exporters with simplified regulation to incentiveze them to export more. Policy 3: Provide domestic exporters with subsidies to incentivize them to export more. The program costs a substantial amount of money to the government (assume the expenses on the program are part...
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U.S Trade Deficit Discussion Questions for U.S. Trade Deficit Discussion 1. What is the current US trade balance? trade balances of other industrialized nations (Choose 2)? 2. What are some 3. What are some characteristics that could be used to describe countries with which the US has a trade deficit? her 4. Which of the arguments either for or against sustaining the trade deficit-do you find more persuasive? Why? 5. What are the tradeoffs described by the arguments for and...
The topic: Assume an open, mixed economy.That is, foreign trade is part of the economy and the economy includes both a public (government) and a private (consumers and businesses) sector. Given this, aggregate demand is expressed as (C+I+G+ X). Assume the MPC is .7. Assume a stimulus package of $100 billion has been approved by Congress and the money has been spent. In order to pay for those expenditures, Congress also approved a $100 billion increase in individual income taxes....
Subscribe The topic: Assume an open, mixed economy. That is, foreign trade is part of the economy, and the economy includes both a public (government) and a private (consumers and businesses) sector. Given this, aggregate demand is expressed as (C + I + G + X). Assume the MPC is .7. Assume a stimulus package of $100 billion has been approved by Congress and the money has been spent. In order to pay for those expenditures, Congress also approved a...
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