The table below includes information on the hypothetical economy of Hersty. Assume the government is running a deficit. Enter the missing values in the table and answer the question below the table. Note that all values are in millions of Herstian dollars. Budget Deficit Investment 75 Spending Private Savings 2010 125 Trade Deficit 150 2011 110 400 110 2012 650 105 365 The country of Hersty has a budget deficit and trade deficit, a situation referred to as the twin deficits. Which of the following is the most accurate statement about the twin deficits? They are identical twins, always the same size. It is common to see trade and budget deficits increase at the same time. Budget deficits lead to lower interest rates, which encourage foreigners to buy U.S. bonds rather than U.S. goods and services. The twin deficits result in an outflow of foreign financial investment.

The table below includes information on the hypothetical economy of Hersty. Assume the government is running a deficit. Enter the missing values in the table and answer the question below the table. Note that all values are in millions of Herstian dollars. Budget Deficit Investment 75 Spending Private Savings 2010 125 Trade Deficit 150 2011 110 400 110 2012 650 105 365 The country of Hersty has a budget deficit and trade deficit, a situation referred to as the twin deficits. Which of the following is the most accurate statement about the twin deficits? They are identical twins, always the same size. It is common to see trade and budget deficits increase at the same time. Budget deficits lead to lower interest rates, which encourage foreigners to buy U.S. bonds rather than U.S. goods and services. The twin deficits result in an outflow of foreign financial investment.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Concept explainers

Fiscal Policy and Money Market

Fiscal policy is one of the important tools that is used by the government to control inflation or aggregate demand in the economy. Under this policy, there are two rules which are used by the government, one is the expenditure of the government and the other is the taxation or income of the government which it collects from the public.

Question

The table below includes information on the hypothetical economy of Hersty. Assume the government is
running a deficit. Enter the missing values in the table and answer the question below the table. Note that all
values are in millions of Herstian dollars.
Budget
Deficit
Investment
Spending
Private
Savings
Trade
Deficit
2010
125
75
150
2011
110
400
110
2012
650
105
365
The country of Hersty has a budget deficit and trade deficit, a situation referred to as the twin deficits.
Which of the following is the most accurate statement about the twin deficits?
They are identical twins, always the same size.
It is common to see trade and budget deficits
increase at the same time.
Budget deficits lead to lower interest rates, which
encourage foreigners to buy U.S. bonds rather than
U.S. goods and services.
The twin deficits result in an outflow of foreign
financial investment.

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