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A balance of trade (trade balance) is the difference between the monetary values of exports and imports of a country's economic output over a given period of time. Trade balance can be positive (favorable) when the value of exports is greater than the value of imports. The positive trade balance is also called trade surplus. On the other hand, if the value of imports is greater than the value of exports, the trade balance indicates trade deficit.
Trade balance affects the Gross Domestic Product (GDP) of a country because net export is a component of the GDP. Recall GDP = C + I + G + Nx
Trade balance also affects the exchange rate of a country's currency. Supply and demand for foreign currency result in changing prices of a currency. The price of a currency changes as demand for a foreign currency changes.
Based on the above summary and the detailed descriptions of the balance of payments, exchange rates and trade deficits issues in the textbook (Chapter 39) discuss the following questions.
Suppose supply of a good is perfectly elastic at a price of $5. The market demand curve for this good is linear, with zero quantity demanded at a price of $25. Given that the slope of this linear demand curve is -0.25, draw a supply and demand.
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Graph the q = 100 isoquant. Indicate the points on that isoquant de.ned in part a and part b. What is the RTS along this isoquant? Explain why the RTS is the same at every point on the isoquant. So i know that my labor for part A is 80, labor for ..
Provide an overview of current conditions and challenges for each of the two areas listed above, detailing why these represent challenges to both economic stability and economic growth.
The one-year real rate of interest is currently estimated to be 3 percent. The current annual rate of inflation is 2 percent, and market forecasts expect the annual rate of inflation to be 5 percent. Approximately, what is the current one-year nom..
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If the Fed orders a contractionary monetary policy, describe what will happen to the following.
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The Wozniak Corporation, a maker of aircraft engines, determines that in 2008 the demand curve for its product is as follows-What is the price elasticity of demand if price equals $500?
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