Ch 32 Flashcards
1
Q
Effects of a budget deficit
A
- national saving falls
- real interest rate rises
- domestic investment and NCO fall
- real exchange rate appreciates
- net exports fall
2
Q
Investment tax
A
Increases investment increasing productivity for with and living standards, budget deficit opposite
3
Q
Tariff
A
Tax on imports
4
Q
Import quota
A
A limit on the quantity of imports
5
Q
Voluntary export restrictions
A
Gov pressures another country to restrict its exports
6
Q
Reasons for restricting imports
A
- save jobs in domestic industry
- reduce trade deficit
Doesn’t reduce deficit and saves jobs in importing industries but destroys those in exporting
7
Q
Capital flight
A
A large and sudden reduction in the demand for assets located in a country
8
Q
Equation for demand of loanable funds
A
D= investment + NCO
