Is a trade surplus indicative of a strong, healthy economy? Why or why not?

*13. ”Changes in exchange rates will automatically direct a country to a current-account balance under a flexible exchange rate system.” Is this statement true or false?

*14. Several members of Congress have been highly critical of Japan and China because U.S. imports from these countries have persistently been substantially greater than our exports to them.

a. Under a flexible exchange rate system, is there any reason to expect that the imports from a given country will tend to equal the exports to that country?

b. Can you think of any reason why the United States might persistently run a trade deficit with these countries?

*15. In recent years, the central banks of both Japan and China have purchased large amounts of U.S. Treasury bonds. These purchases increase the exchange rate value of the dollar relative to the Japanese yen and Chinese yuan. Are these purchases harmful to the U.S. economy? Why or why not?

*1. How do taxes influence the efficiency of resource use? How much does it cost for the government to raise an additional dollar (or $1 billion) of tax revenue?