58

Suppose that private savings, S, are $45 million. The taxes paid to all levels of government, T, are $15 million. Government spending, G, is $68 million. Investment, I, is $22 million. Which of the following is true for this country? (Hint: recall the savings and investment identity S +(M - X) = I +(G - T)

a.

The country's savings deficit is $23 million

b.

The country has a trade surplus of $30 million

c.

The country has a budget surplus of $53 million

d.

The country's capital account has a surplus of $30 million

An increase in tariffs and other trade restrictions for products entering a country will have what effect on the country's trade balance?

a.

Trade surpluses will decrease, as exports decrease

b.

Trade surpluses will decrease, as imports increase

c.

Trade deficits will increase, as exports decrease

d.

Trade deficits will decrease, as imports decrease

A country's government is concerned about importing economic problems from abroad, so it sets up an exchange rate system that can service as a buffer to insulate the economy from the impact of international events. Which of the following exchange rate systems is the best candidate to achieve this goal?

a.

A fixed exchange rate system

b.

A free-floating exchange rate system

c.

A managed fixed rate exchange rate system

d.

A managed float exchange rate system