Question: The chapter notes that the rise in the U.S. trade deficit during the 1980s was due largely to the rise in the U.S. budget deficit.

The chapter notes that the rise in the U.S. trade deficit during the 1980s was due largely to the rise in the U.S. budget deficit. On the other hand, the popular press sometimes claims that the increased trade deficit resulted from a decline in the quality of U.S. products relative to foreign products.

a. Assume that U.S. products did decline in relative quality during the 1980s. How did this affect net exports at any given exchange rate?

b. Draw a three-panel diagram to show the effect of this shift in net exports on the U.S. real exchange rate and trade balance.

c. Is the claim in the popular press consistent with the model in this chapter? Does a decline in the quality of U.S. products have any effect on our standard of living?

Step by Step Solution

★★★★★

3.48 Rating (164 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a A decline in the quality of US goods at a given real exchange rate would reduce net exports ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

207-B-E-M-E (906).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

The chapter notes that clothing chain H&M only features computer-generated models on its Website. The company drew criticism for presenting only picture-perfect people. A company spokesman defended...

The chapter notes that some firms choose to outsource their human resource management systems. If a firm has a core value of respecting its employees and rewarding top performance with training,...

The chapter notes that people respond to very subtle cues in the environment even when they are very unaware of these effects. Can or should marketers exploit these influences?

4. The chapter notes that the rise in the U.S. trade deficit during the 1980s was due largely to the rise in the U.S. budget deficit. On the other hand, the popular press sometimes claims that the...

=+ 4. The chapter notes that the rise in the U.S. trade deficit during the 1980s was due largely to the rise in the U.S. budget deficit. On the other hand, the popular press sometimes claims

1.4. The chapter notes that the rise in the U.S. trade deficit during the 1980s was due largely to the rise in the U.S. budget deficit. On the other hand, the popular press sometimes claims that the...

The chapter notes that the rise in the U.S. trade deficit during the 1980s was largely due to the rise in the U.S. budget deficit. On the other hand, the popular press sometimes claims that the...

Please provide answers only, no explanation is necessary. Make sure answer go with question # and part (i.e. 1a, 1b, 1c, etc...). MAKE FORMAT EASY TO READ. 1. 1. Problems and Applications Q1 True or...

Please provide answers only, no explanation is necessary. Make sure answer go with question # and part (i.e. 1a, 1b, 1c, etc...). MAKE FORMAT EASY TO READ AND PLEASE DO THE GRAPHS THAT ARE INCLUDED...

According to this model, which of the following statements are true as a result of the quality change? Check all that appiy. D There is no change in the real interest rate. D Net capital outow...

Owners of a business are contemplating investing $550,000 in non-current assets in early January 2014. They are exploring ways to finance it. In 2012, the company had $250,000 in trade receivables,...

What thermodynamic consideration prevents ion pairs from contributing significantly to protein stability?

Pooling debt, such as mortgages, into securities be sold to investors is termed: Group of answer choices securitization investment banking underwriting indemnification

What competencies are needed by engineers (or a profession you anticipate you will seek when you graduate) and managers of an engineering department (or a department you are likely to work in)?

Over the past decade, some of Chinese saving has been used to finance American investment. That is, the Chinese have been buying American capital assets. a. If the Chinese decided they no longer...

Suppose that U.S. mutual funds suddenly decide to invest more in Canada. a. What happens to Canadian net capital outflow, Canadian saving, and Canadian domestic investment? b. What is the long-run...

List and discuss three key facts about economic fluctuations.

Luther Industries has a dividond yield of 5% and a cost of equity capital of 10%. Luther Industries dividends are expected to grow at a constant rate indefinitely. The growth rate of Luther's...

a) why is the sampling distribution approximately normal? b) what is the mean of the sampling diatribution? c) what is the standard deviation of the sampling distribution? d) Assuming that the...

Free Cash Inc.'s cost of capital is estimated to be 9 percent. The free cash flows to the firm (FCFF) is estimated to be S4:750r S7:000: and S9:750 in each of the next three years. Free cash flows...