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Chapter 23: Q. 5 (page 575)
At one point Canada鈥檚 GDP was \(1,800 billion and its exports were \)542 billion. What was Canada鈥檚 export ratio at this time?
30.1%
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When is a trade deficit likely to work out well for
an economy? When is it likely to work out poorly?
If a country is a big exporter, is it more exposed to global financial crises?
Some economists warn that the persistent trade deficits and a negative current account balance that the United States has run will be a problem in the long run. Do you agree or not? Explain your answer.
Table 10.7 provides some hypothetical data on macroeconomic accounts for three countries represented by A, B, and C and measured in billions of currency units. In Table 10.7, private household saving is SH, tax revenue is T, government spending is G, and investment spending is I.
| A | B | C | |
| SH | 700 | 500 | 600 |
| T | 00 | 500 | 500 |
| G | 600 | 350 | 650 |
| I | 800 | 400 | 450 |
Table 10.7 Macroeconomic Accounts
a. Calculate the trade balance and the net inflow of
foreign saving for each country.
b. State whether each one has a trade surplus or
deficit (or balanced trade).
c. State whether each is a net lender or borrower
internationally and explain.
Explain briefly whether each of the following would be more likely to lead to a higher level of trade for an economy, or a greater imbalance of trade for an economy.
a. Living in an especially large country
b. Having a domestic investment rate much higher than the domestic savings rate
c. Having many other large economies geographically nearby
d. Having an especially large budget deficit
e. Having countries with a tradition of strong protectionist legislation shutting out imports
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