Why do governments prefer to avoid current account deficits that are too large?
What will be an ideal response?
A current account deficit may pose no problem if the borrowed funds are channeled into productive domestic investment projects that pay for themselves with the revenue they generate in the future. However, sometimes, large current account deficits represent temporarily high consumption resulting from misguided government policies or some other malfunctioning of the economy. Sometimes, the investment projects that draw on foreign funds may be badly planned, etc. In such cases, the government might wish to reduce the current account deficit immediately rather than face problems in repaying its foreign debt in the future.
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The term for the Fed's day-to-day technique for controlling the stock of money is
A) discounting operations. B) interest-rate operations. C) liquidity operations. D) open market operations. E) treasury operations.
A firm hires labor in a perfectly competitive labor market. If the wage rate is $44, the firm should hire
a. 44 workers b. all units of labor whose marginal product is 44 c. all units of labor whose marginal revenue product is $44 d. all units of labor whose marginal revenue product is greater than or equal to $44 e. all units of labor whose marginal revenue product is less than or equal to $44