Assignment 7: There are 5 questions in total adding up to 100pts for this week
1.Consider two headlines: “Foreigners are bringing bags of money to the U.S. to grab property” vs. “Record U.S. trade deficit.” How can both be true simultaneously?
2.Consider two headlines: “Money is fleeing the U.S. faster than ever” vs. “Record U.S. trade surplus.” How can both be true simultaneously? EXPLAIN
In the chapter, two stories about the deficit are told: “the great place to invest” story and the “foolishly saving too little” story. In the following examples, which is more like the “great place to invest” story and which is more like the “foolishly saving too little” story? EXPLAIN
1.Goofus uses his student loan money to buy a nice flat-screen TV and can’t afford most of his textbooks. Gallant uses his student loan money to buy his textbooks and coffee that keeps him awake during study sessions.
2.Carter borrows money from his dad to attend the right parties, make useful industry connections, and build his career. Ernest borrows money from his dad to attend fun parties, meet fun people, and, well, that’s about it.
3.America 1 borrows money to invest in her future. America 2 borrows money to pay for a spending binge.
Nobel Laureate Robert Solow once jokingly noted, “I have a chronic [trade] deficit with my barber, who doesn’t buy a darned thing from me.” Is this a problem? Why or why not? How does this relate to the U.S.–China, U.S.–Mexico, and U.S.–Japan trade deficits? EXPLAIN
At Christmas, five-year-old Gwen runs a massive trade deficit with her parents: She “exports” only a wrapped candy cane to her parents, but she “imports” a massive number of video games, dolls, and pairs of socks. EXPLAIN
1.Is this trade deficit a good thing for Gwen?
2.When Gwen turns 25, her parents insist on being repaid for all those years of Christmas presents—that is, they require her to run a “trade surplus.” Is this “trade surplus” good news for Gwen? Why or why not?
- Modern Principles of Economics, 3rd Edition (New York: Worth Publishers, 2016), Tyler Cowen and Alex Tabarrock
- Please show all work.