The global economy

1. Explain the difference between current account deficit and budge deficit. Explain how the US current account is being financed. What are the implications for its sustainability?

2. What is a basic implication of the national income accounts identity that saving minus investment equals exports minus imports. In light of the national saving, what types of government policies can increase long-term living standards?

3. The East Asia New Industrializing Counties suggests that as international productivities converge,so do international wage levels. Why do you suppose this happened for the East Asia NICs? Considering your answer, what do you think is likely to happen to the relative wages (relative to thoes in the United States) of China in the coming decade? Explain your reasoning.

4. Presumably, since the Unitied States is a ‘large country’ in many of its international markets, a positive optimum tariff exists for this country. It follows therefore that when any legislator or government official who promotes zero-tariff free trade policies, is by definition not acting in the public’s best interest, Discuss.

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