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Principles of Macroeconomics 3e

Critical Thinking Questions

Principles of Macroeconomics 3eCritical Thinking Questions

Critical Thinking Questions

32.

Occasionally, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Explain why such a statement is economically impossible.

33.

A government official announces a new policy. The country wishes to eliminate its trade deficit, but will strongly encourage financial investment from foreign firms. Explain why such a statement is contradictory.

34.

If a country is a big exporter, is it more exposed to global financial crises?

35.

If countries reduced trade barriers, would the international flows of money increase?

36.

Is it better for your country to be an international lender or borrower?

37.

Many think that the size of a trade deficit is due to a lack of competitiveness of domestic sectors, such as autos. Explain why this is not true.

38.

If you observed a country with a rapidly growing trade surplus over a period of a year or so, would you be more likely to believe that the country's economy was in a period of recession or of rapid growth? Explain.

39.

Occasionally, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Is this possible?

40.

What is more important, a country’s current account balance or GDP growth? Why?

41.

Will nations that are more involved in foreign trade tend to have higher trade imbalances, lower trade imbalances, or is the pattern unpredictable?

42.

Some economists warn that the persistent trade deficits and a negative current account balance that the United States has run will be a problem in the long run. Do you agree or not? Explain your answer.

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