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In recent years, the European Union has reduced trade barriers among its members and most EU members. What impact will these changes have on European economies?
Do you think we should erect trade barriers to keep out cheap Japanese goods if the source of their low price is governmental subsidies? Why or why not?
How do tariffs and quotas differ? Can you think of any reason why foreign producers might prefer a quota rather than a tariff? Explain your answer.
Why would Californians be better off if they bought goods produced only in California? Would the employment in California be higher? Explain.
Suppose that a very high tariff were placed on steel imported into the United States. How would that affect employment in the U.S. auto industry?
How might the standard of living in the divided United States have been affected? Explain.
Does international trade cost American jobs? Does interstate trade cost your state jobs? What is the major effect of international and interstate trade?
Is this dependence on foreign capital dangerous? What would happen if the inflow of foreign capital came to a halt?
Explain why the current-account balance and capital account balance must sum to zero under a pure flexible-rate system.
How will the purchases of items from foreigners compare with the sales of items to foreigners when the foreign exchange market is in equilibrium? Explain.
If the dollar depreciates relative to the Japanese yen, how will this affect the dollar price of a Japanese camera produced by Nikon, for example?
Why will wages in the United States be pushed down? Why or why not? Are low-wage workers in the United States hurt when there is more trade with Mexico?
Analyze the impact of the quota. Use supply and demand analysis to illustrate your answer. To whom do the gains and losses of this policy accrue?
During the 1990s, the federal budget moved from a deficit to a surplus. What factors accounted for this change?
If stimulating aggregate demand created the prosperity, what would you expect to happen to the rate of inflation? Did this happen during the 1980s?
Outline alternative views that predict how this fiscal action will influence interest rates, aggregate demand, output, and employment.
What fiscal policy actions should be taken if the unemployment rate is high and current GDP is well below the economy's potential output rate?
Outline the supply-side view of fiscal policy. How does this view differ from the various demand-side theories?
From a stabilization standpoint, why is proper timing of a change in fiscal policy important? Is it easy to time fiscal policy changes properly? Why or why not?
Why can banks continue to hold reserves that are only a fraction of the demand deposits of their customers? Is your money safe in a bank? Why or why not?
What makes money valuable? Does money perform an economic service? Explain. Could money perform its function better if there were twice as much of it?
What determines whether or not a financial asset is included in the Ml money supply? Why are interestearning checkable deposits included in Ml?
What is meant by the statement, This asset is illiquid? List some things you own and rank them from most liquid to most illiquid.
How do persistently large budget deficits affect capital formation and the long-run rate of economic growth?
Why does fiscal policy have a strong impact on aggregate demand? Did the large budget deficits of the 1980s lead to excessive aggregate demand?