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Author Question: Explain why the budget deficit and the trade deficit are sometimes referred to as the twin deficits. ... (Read 131 times)

joe

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on: Jun 29, 2018
Explain why the budget deficit and the trade deficit are sometimes referred to as the twin deficits.
 
  What will be an ideal response?

Question 2

The total value of U.S. Treasury bonds outstanding equals
 
  A) the federal government deficit. B) the cyclically adjusted budget deficit.
  C) the federal government surplus. D) the federal government debt.


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yotaSR5

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Reply #1 on: Jun 29, 2018
Answer to Question 1

When the government runs a budget deficit, the government is spending more than it is receiving in net taxes. As the government reduces its saving, the interest rate will rise. With higher interest rates, firms will reduce domestic investment, capital outflows will fall, and capital inflows will rise. As a result, net foreign investment will also fall. Since net foreign investment is equal to net exports, as net foreign investment falls, so will net exports.

Answer to Question 2

D


joe

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Reply #2 on: Jun 29, 2018
Thank you :)


yotaSR5

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Reply #3 on: Jun 29, 2018
Happy to help you


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