Author Question: Why do governments prefer to avoid excessive current account surpluses? Or, why are growing domestic ... (Read 152 times)

Jkov05

  • Hero Member
  • *****
  • Posts: 556
Why do governments prefer to avoid excessive current account surpluses? Or, why are growing domestic claims to foreign wealth ever a problem?
 
  What will be an ideal response?

Question 2

In general, the development of underground economic activity ________ economic efficiency
 
  A) hinders
  B) has no effect
  C) aides
  D) hard to tell, sometime hinders, sometimes aides
  E) spikes



trog

  • Sr. Member
  • ****
  • Posts: 343
Answer to Question 1

For a given level of national saving, an increased current account surplus implies lower investment in domestic plant and equipment. A few reasons why: first, the returns to domestic savings may be easier to tax than those on assets abroad; second, an addition to the home capital stock may reduce domestic unemployment and therefore lead to higher national income; third, domestic investment by one firm may have beneficial technological spillover effects on other domestic producers that the investing firm does not capture. In addition, the country may in the future find itself unable to collect the money it is owed. Furthermore, countries with large surpluses can become targets for discriminatory protectionist measures by trading partners with external deficits.

Answer to Question 2

A



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question


 

Did you know?

The heart is located in the center of the chest, with part of it tipped slightly so that it taps against the left side of the chest.

Did you know?

Prostaglandins were first isolated from human semen in Sweden in the 1930s. They were so named because the researcher thought that they came from the prostate gland. In fact, prostaglandins exist and are synthesized in almost every cell of the body.

Did you know?

There are approximately 3 million unintended pregnancies in the United States each year.

Did you know?

On average, the stomach produces 2 L of hydrochloric acid per day.

Did you know?

The tallest man ever known was Robert Wadlow, an American, who reached the height of 8 feet 11 inches. He died at age 26 years from an infection caused by the immense weight of his body (491 pounds) and the stress on his leg bones and muscles.

For a complete list of videos, visit our video library