Both the trade and budget balance were in roughly zero until the 1980s when the budget deficit increased dramatically and the U.S. trade deficit increased dramatically
However, during the late 1990s the budget deficit shrank—in fact, moving to surplus—at the same time that the U.S. trade deficit increased significantly. Since 2000, the budget deficit has increased significantly, particularly after 2008.What is the relationship between a country's trade balance and its stance as a borrower or lender? Historically, has the U.S. been a net lender or net borrower? Why do you think that this is? Do you think that the U.S. budget situation might have anything to do with this?
Countries that run trade deficits must borrow from other countries to pay for this. Thus, countries that run trade deficits are net borrowers. The huge budget deficits in the U.S. coupled with its high levels of consumption (and low savings) have led it to becoming the largest debtor nation in the world. Large trade deficits have occurred during the same time that the U.S. has also been running large budget deficits, indicating that there may well be some cause and effect between the two.
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Suppose a country has 100 westerners and 100 easterners. A westerner can produce either 6 units of food or 2 units of national defense; an easterner can produce either 2 units of food or 1 unit of national defense
a. Show that easterners have a comparative advantage in the production of defense. b. Suppose this country has decided it wants to produce 60 units of defense. Would the country have more food to consume if the westerners produced these 60 units of defense or if the easterners produced this defense? c. Why should you have anticipated your answer to part (b) of this question? d. Now suppose this country institutes a draft and chooses people for the military randomly. Suppose further that it drafts 20 westerners and 20 easterners (who together will produce 60 units of defense). How much food will the country produce if it chooses to have a military draft? e. Compare the cost in terms of foregone food production under a draft to the cost under a volunteer army where the country pays the easterners enough to persuade them to become soldiers.
Which of the following refers to the capture hypothesis of regulation?
A) the ability of the government to capture monopoly profits B) the control of regulatory agencies by firms in an industry C) consumer cost savings captured through regulation D) horizontal mergers