Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 32, Problem 2QR
To determine
Why the budget deficits and the trade deficits are called twin deficits.
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What is the difference between a government deficit and a trade deficit ?
Why are budget deficits and trade deficits sometimescalled the twin deficits?
How big is the trade deficit relative to overall GDP?
Chapter 32 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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- If there is no trade deficit, budget deficit =$500, what is the difference between savings and planned investment in equilibrium?arrow_forwardWe often hear that trade deficits are bad for a country. Should we agree or disagree with this viewpoint?arrow_forwardDuring the Great Recession there was a large drop in the US trade deficit. There was also a large increase in the US government budget deficit. Are these two facts related? What else must be going on to have a falling trade deficit and a growing government budget deficit at the same time?arrow_forward
- Which of the following may not be associated with a deficit? Select one: a. A need to increase borrowings b. Less foreign investment In the deficit economy c. Increased imports d. Lesser capital inflows e. Increased exportsarrow_forwardAnalyzing the effects of a trade deficitarrow_forwardThe 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.arrow_forward
- What is a trade deficit, and why does it hurt us to consistently run a deficit with another country?arrow_forwardWhat are some reasons to think that America is obligated to help poor countries? What are some reasons to think that America is not obligated to help poor countries? Is foreign aid worsening our budget deficit?arrow_forwardWhat is the relationship between India's fiscal policies and its current account?arrow_forward
- Suppose that the economy is in equilibrium with a trade deficit and that saving is greater than investment. According to the circular flow model, the government's budget a. must be in deficit b. must be in surplus c. must be balanced d. could be in a surplus or a deficitarrow_forwardA government decides to introduce an expenditure-switching measure to reduce a balance of trade deficit. Which of the following is an expenditure-switching measure? Pick a,b,c, or d A. A government subsidy to domestic producers B. An increase in income tax C. An increase in the rate of interest D.A decrease in state benefitsarrow_forwardWhich is better in developing and developed countries, is fiscal policy or monetary policy?arrow_forward
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