international economy 2 United States runs a trade deficit, how does this affect
ID: 1127841 • Letter: I
Question
international economy
2 United States runs a trade deficit, how does this affect our GDP? icit reduces GDP by reducing the Net Export component of Aggregate Demand Question 9: If the b. A trade deficit red c. uces GDP by reducing the Net Export component of Aggregate Supply A trade deficit increases GDP goods at lower prices by allowing consumers in the US to have a greater volume of Ques tion 10: If the Federal Reserve Bank has a contractionary monetary policy that causes the interest rates in th a. Higher e US to rise, how will this affect our currency valuation in the immediate future? interest rates will increase the demand for US goods and services abroad and that will depreciate our currency b. her interest rates will reduce the demand for US financial assets abroad and that will depreciate our currency Hig her interest rates will increase the demand for US financial assets abroad and that will appreciate our currency c. Hig QUEST IONS ON UNITS 1-3: MACRO MEASUREMENTS, FISCAL AND MONETARY POLICY Question 11: We distinguish between Nominal GDP and Real GDP. What is the reason for calculating Real GDP as a different measure from Nominal GDP a. Real GDP includes transactions that are not included in Nominal GDP but contribute to economic activity, such as the sale of illegal goods and services, used goods, and non market barter transactions b. Real GDP adjusts nominal GDP for incomes that are earned by production facilities located in other countries, and for incomes that were earned this year but will be received in some future year (such as social security payments) c. Real GDP adjusts Nominal GDP by subtracting out all expenditures by government so that only private sector transactions are counted d. Real GDP shows the value of goods and services at prices that prevailed in some earlier base year, so that GDP growth reflects only growth in the goods and services themselves and not increases in the general price level of those goods and services Question 12: If the government is primarily concerned about inflation becoming too high, what fiscal policy can they reasonably use in order to lower the general price level? To lower infl spending to increase aggregate demand while hoping that output will grow faster than prices are growing ation, the government can adopt an expansionary fiscal policy, using deficit a. b. To lower inflation, the government can reduce the interest rates which it controls so that this falling factor price will cause product prices to fall as well. To lower inflation, the government can adopt a contractionary fiscal policy, reducing the growth of aggregate demand and the increases in the general price level that accompany increases in aggregate demand To lower inflation, the government can place a tax on exports, so that more goods will stay in the country and this increase in the domestic supply of goods will make goods cheaper c. d.Explanation / Answer
9. A.
Explanation: Trade deficit takes place when the value of imports exceeds the value of exports. Trade deficit reduces the value of GDP by making net exports negative. Net export is a component of aggregate demand. The four components of aggregate demand are Consumption (C), Investment (I), Government Spending (G) and Net Exports (X-M). Aggregate supply has two components, which are Saving and Consumption.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.