Which of the following correctly shows the relationship between ...

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Which of the following correctly shows the relationship between savings, the government budget balance, and the current account?
 
  A) S + CA = I + (T - G)
  B) S + CA = I + (T + G)
  C) S + (T - G) = I + CA
  D) S + (T + G) = I + CA

Question 2

Free trade may be good for a nation, but not for everyone in the nation. Explain why free trade is controversial and the list the justifications that proponents of trade adjustment assistance offer in support of those policies.
 
  What will be an ideal response?

[sarahccccc]

Answer to Question 1

C

Answer to Question 2

The nation as a whole is better off as long as the gains from the winners exceed the losses from the losers. Restructuring means that some industries are dying and workers and producers have to find other opportunities. This may be difficult for not only those directly involved in the industry, but also for the surrounding communities. Adjustment assistance states that since the nation as a whole benefits from trade, there are newly added resources that can be used for compensation. Second, there is a potential ethical obligation to assist those hurt by economic change. Third, compensation reduces the incentives for those hurt by trade to fight against free trade policies.