This topic contains a solution. Click here to go to the answer

Author Question: Explain why macroeconomic policies that are coordinated can enhance economic growth, but why ... (Read 309 times)

jake

  • Hero Member
  • *****
  • Posts: 538
Explain why macroeconomic policies that are coordinated can enhance economic growth, but why policies that are not coordinated can increase global imbalances.
 
  What will be an ideal response?

Question 2

Explain some of the reasons why the HO model is difficult to test empirically. Does this mean that it is not a useful model of trade?
 
  What will be an ideal response?



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

ngr69

  • Sr. Member
  • ****
  • Posts: 318
Answer to Question 1

If a group of industrial economies decide jointly to expand their economies with fiscal and monetary policies, then growth in their incomes raises incomes around the world as their demand for imports stimulates production in other countries. If all economies expand simultaneously, then no country is burdened by a sudden excess of imports over exports. Their exports grow along with their imports and with the growth in demand in their trading partners' economies. If a country uses expansionary policies when other countries are not doing the same, the country is likely to have a deterioration in their current accounts since their trading partners are not growing at the same rate. If expansionary fiscal policies cause interest rates to rise, then a further deterioration in the current account is likely due to the appreciation of the currency resulting from the inflow of foreign capital. Thus global imbalances increase.

Answer to Question 2

Problems with accurately measuring factor endowments and standardizing units for that they can be compared make it difficult to test the HO model. The model also cannot capture technological differences between countries, as well as a variety of other factors, such as economic policy, economies of scale, and corporate structure. Even with these issues, economists generally believe that endowments matter and that the HO model is a useful way of explaining the effects of trade on factors of production.




jake

  • Member
  • Posts: 538
Reply 2 on: Jun 30, 2018
Wow, this really help


deja

  • Member
  • Posts: 332
Reply 3 on: Yesterday
Great answer, keep it coming :)

 

Did you know?

In the United States, congenital cytomegalovirus causes one child to become disabled almost every hour. CMV is the leading preventable viral cause of development disability in newborns. These disabilities include hearing or vision loss, and cerebral palsy.

Did you know?

Cucumber slices relieve headaches by tightening blood vessels, reducing blood flow to the area, and relieving pressure.

Did you know?

For high blood pressure (hypertension), a new class of drug, called a vasopeptidase blocker (inhibitor), has been developed. It decreases blood pressure by simultaneously dilating the peripheral arteries and increasing the body's loss of salt.

Did you know?

Certain topical medications such as clotrimazole and betamethasone are not approved for use in children younger than 12 years of age. They must be used very cautiously, as directed by a doctor, to treat any child. Children have a much greater response to topical steroid medications.

Did you know?

Multiple experimental evidences have confirmed that at the molecular level, cancer is caused by lesions in cellular DNA.

For a complete list of videos, visit our video library