Chapter 23: Q. 18 (page 576)
How did large trade deficits hurt the East Asian countries in the mid-1980s? (Recall that trade deficits are equivalent to inflows of financial capital from abroad.)
The money can be pulled out of stock and bond markets, real estate, and banks.
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Explain briefly whether each of the following would be more likely to lead to a higher level of trade for an economy, or a greater imbalance of trade for an economy.
a. Living in an especially large country
b. Having a domestic investment rate much higher than the domestic savings rate
c. Having many other large economies geographically nearby
d. Having an especially large budget deficit
e. Having countries with a tradition of strong protectionist legislation shutting out imports
What three factors will determine whether a nation has a higher or lower share of trade relative to its GDP?
Both the United States and global economies are booming. Will U.S. imports and/or exports increase?
If a country is running a government budget surplus, why is (T – G) on the left side of the saving-investment identity?
Does a trade surplus help to guarantee strong economic growth?
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