Macro Economics Assignment Question
The graph below reproduces the Figure. It is titled: "National Saving, Investment, and the trade Balance in the United States, 1960-2006"
a. If U.S. national saving remained at current levels but investment (or gross investment) went down to, say, roughly 5% of GDP, the trade balance (or current account) deficit would become a surplus. In your opinion, how would such a development affect long-run U.S. growth rates? How would it affect national wealth in the short-run?
b. If China decided to spend its reserves on importing technology from the U.S. (say, buying U.S. - manufacturing machines or IT services), how would you expect it to show on the graph for the U.S. economy? Show this qualitatively on the graph above by extending the three lines representing I, S, and NX (Canadian students, read: GI, S, and CA) to the right. Explain.
Attachment:- Assignment.rar