Author Question: Why do governments prefer to avoid excessive current account surpluses? Or, why are growing domestic ... (Read 149 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?

Autoimmune diseases occur when the immune system destroys its own healthy tissues. When this occurs, white blood cells cannot distinguish between pathogens and normal cells.

Did you know?

The modern decimal position system was the invention of the Hindus (around 800 AD), involving the placing of numerals to indicate their value (units, tens, hundreds, and so on).

Did you know?

Oliver Wendell Holmes is credited with introducing the words "anesthesia" and "anesthetic" into the English language in 1846.

Did you know?

Though “Krazy Glue” or “Super Glue” has the ability to seal small wounds, it is not recommended for this purpose since it contains many substances that should not enter the body through the skin, and may be harmful.

Did you know?

Chronic necrotizing aspergillosis has a slowly progressive process that, unlike invasive aspergillosis, does not spread to other organ systems or the blood vessels. It most often affects middle-aged and elderly individuals, spreading to surrounding tissue in the lungs. The disease often does not respond to conventionally successful treatments, and requires individualized therapies in order to keep it from becoming life-threatening.

For a complete list of videos, visit our video library