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Chapter 10: Q 36. (page 267)

Is it better for your country to be an international

lender or borrower?

Short Answer

Expert verified

To be a lender is better than a borrower generally.

Step by step solution

01

Step 1. Definition

When an economic transaction happens the person who gives money is the lender and the person who borrows or takes it is the borrower of the money.

02

Step 2. Explanation

It is comparably better to be a lender than a borrower. This is because, when a country is a lender, it will experience a trade surplus. When it lends its exports increases capital increases and employment increase as to complete the lending the country must have to employ the persons to produce the required output. The country will also receive interest on its lending amount. So that鈥檚 why a lender is in a better position.

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Most popular questions from this chapter

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.

If you observed a country with a rapidly growing

trade surplus over a period of a year or so, would you be more likely to believe that the country's economy was in a period of recession or of rapid growth? Explain.

Using the national savings and investment identity, explain how each of the following changes (ceteris paribus) will increase or decrease the trade balance:

a. A lower domestic savings rate

b. The government changes from running a budget surplus to running a budget deficit

c. The rate of domestic investment surges

Explain the relationship between a current account deficit or surplus and the flow of funds.

If a country is running a government budget surplus, why is (T 鈥� G) on the left side of the saving investment identity?
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