What is the difference between the U.S. current account deficits of the 1980s and the 1990s?
What will be an ideal response?
In the 1980s, the government budget balance (T-G) turned into a large negative, and foreign financing filled the gap. In the 1990s, the federal budget moved to a positive balance, but investment expanded and private savings fell, overwhelming the changes in the government budget position.
You might also like to view...
Suppose fiscal policy makers pass a budget that cuts taxes in the current period and are expected to cut taxes in the future. Use the IS-LM model to illustrate graphically and explain the effects of this policy on current output and the current interest rate
What will be an ideal response?
Why does a network externality arise?
a. Each additional unit of a good sold reduces the value of the previously sold units. b. As more and more units of a good are produced, the average cost declines. c. Consumption of a good by one user does not affect the consumption of subsequent users. d. The firms enjoy economies of scale in the long run. e. Each additional unit of a good sold increases the value of the previously sold units.