Econ homework

1. Read this article from the NY Times: “The Trade Deficit Isn’t a Scorecard, and Cutting It Won’t Make America Great Again” (see homework 6 folder on ANGEL).

a) Why has a persistent U.S. trade deficit with China led to capital inflows from China? ($2,000)

b) The USD is a global reserve currency. How does this contribute to persistent U.S. trade deficits? ($2,000)

c) How could eliminating the trade deficit actually harm America? Cite at least 2 specific factors from the article in your answer. ($2,000)

2. Use the information in the following table to answer the following questions (amounts are millions of U.S. dollars):

a) What is the balance of trade? ($1,000)

b) What is the current account? ($1,000)

3. You are given the following information about an economy.

Income: $102 billion

Tax: $68 billion

Consumption: $38 billion

Government spending: $58 billion

a) What is private saving? ($500)

b) What is public saving? ($500)

c) What is national saving? ($500)

d) Based on your answer in part C, is this country running a current account surplus or deficit? (Hint: use algebra in your answer. Assume investment is > 0). ($1,000)

e) What impact will your answer in part D have on this country’s capital/financial account? ($500)

4. In class, we used the global debt clock to analyze the effects of government debt.