Author Question: Which of the following correctly describes the relationship between savings, the government budget ... (Read 89 times)

cartlidgeashley · **on:** Jun 30, 2018

Which of the following correctly describes the relationship between savings, the government budget balance, and the current account?

A) Private savings plus the government budget balance must equal private investment plus the current account.
B) Private savings plus the current account must equal private investment plus the government budget surplus or deficit.
C) Private savings plus private investment must equal the current account plus the government budget balance.
D) Private investment must equal private savings plus the current account minus the government budget balance.

Question 2

Describe some of the key controversies regarding global cotton trade between high cost and low cost cotton producers.

What will be an ideal response?

Ksh22 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

A

Answer to Question 2

Low cost cotton producers produce less cotton in total, but rely more on cotton exports for income. Their low incomes put them on the edge of survival and the fact that they make less in total to export makes cotton export revenues critical. High cost cotton producers depend much less on their cotton exports and have much higher incomes. High cost cotton producers are assisted through direct and indirect payments from their governments, tariffs on cotton imports, farm support programs including subsidized loans, insurance, marketing and promotion assistance, and revenue guarantees. These programs keep cotton production where it is less efficient and have the potential to harm living standards in developing nations and keep them from fully exploiting their comparative advantage in cotton.