Macroeconomics: Private and Public Choice
15th Edition
ISBN: 9781305176799
Author: Gwartney
Publisher: Cengage
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Question
Chapter 19, Problem 14CQ
(a)
To determine
The exports and imports of Country U’s economy with Country J and Country C.
(b)
To determine
The reason for persistent
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Suppose the US goes into a recession where the economy is not growing very quickly (or is actually shrinking) while the economies of our trading partners remain strong. What will most likely happen to our trade deficit? In your answer, explain what will happen to US exports and US imports and why.
How do you think a fluctuation in foreign exchange rates affect trade?
What is a trade deficit, and why does it hurt us to consistently run a deficit with another country?
Chapter 19 Solutions
Macroeconomics: Private and Public Choice
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- In recent decades, has the U.S. trade balance usually been in deficit, surplus, or balanced?arrow_forwardIf the trade deficit of the United States increases, how is the current account balance affected?arrow_forwardDoes a trade surplus mean an overall inflow of financial capital to an economy, or an overall outflow of financial capital? What about a trade deficit?arrow_forward
- How a devaluation may reduce the trade deficit of a country? What condition is required to reduce trade deficit? If this condition is not met , what type of effect may arise?arrow_forwardDefine the term TRADE DEFICITarrow_forwardHow do government budget deficits affect the exchange rate and trade balance?arrow_forward
- What is a trade deficit? How is a trade deficit related to the net inflow of foreign capital? Is a trade deficit bad? Why or why not?arrow_forwardHow does a fall in the exchange rate cause an increase in the cost of raw imported materials?arrow_forwardWhy does a recession cause a trade deficit to increase?arrow_forward
- How does an increase in domestic income affect demand for imports how does a decrease in real exchange rate affect demand for importsarrow_forwardUnder what conditions will a larger budget deficit cause a trade deficit?arrow_forwardWhat impact will an appreciation of the dollar have on the relative price of foreign goods to Americans, and the relative price of American made products to foreigners? What will likely happen to America's trade deficit?arrow_forward
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