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Chapter 23: Q. 7 (page 575)
Why does the trade balance and the current account balance track so closely together over time?
The track balance number is included in the current account balance.
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The United States exports 14% of GDP while Germany exports about 50% of its GDP. Explain what that means.
Occasionally, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Explain why such a statement is economically impossible.
What three factors will determine whether a nation has a higher or lower share of trade relative to its GDP?
Imagine that the economy of Germany finds itself in the following situation: the government budget has a surplus of of Germany’s GDP; private savings is of GDP, and physical investment is of GDP.
a. Based on the national saving and investment identity, what is the current account balance?
b. If the government budget surplus falls to zero, how will this affect the current account balance?
What is included in the current account balance?
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