1.How can a trade deficit actually increase the productivity of an economy?
A) by causing people to save
B) by building up a large amount owed
C) by importing funds used for capital deepening ******
D) by importing goods for short–term use
I think the right answer is C...?
2. If the government uses tax money to pay for long–term investments such as roads or other infrastructure, what happens to the economy?
A.investment decreases
B.investment increases
C.taxes increase ******
D.taxes decrease
I think this one is C ....?
Thank you in advance
1. A
2. B
3. D
4. B
5. C
6. B
7. C.
8. B
9. D
10. A
1. C. By importing funds used for capital deeping.
2. B. Investment Increases.
Jen is correct
Question 2 is actually B, investment increases
For the first question, the correct answer is indeed C) by importing funds used for capital deepening.
A trade deficit occurs when a country imports more goods and services than it exports. While it may seem counterintuitive, a trade deficit can actually increase the productivity of an economy. This is because when a country runs a trade deficit, it is importing more funds from foreign sources, which can be used for investment and capital deepening.
When foreign funds flow into the country, it can be used to finance domestic investment in areas such as infrastructure, technology, research and development, and education. These investments contribute to the long-term growth and productivity of the economy. By importing funds for capital deepening, a trade deficit can actually stimulate economic development and enhance productivity.
Regarding the second question, the correct answer is A) investment decreases.
When the government uses tax money to pay for long-term investments like roads or other infrastructure, it typically leads to a decrease in private investment. This is because government-funded projects often require a significant amount of resources and funding, which can crowd out private investments.
When the government raises taxes to finance such long-term investments, individuals and businesses have less disposable income and reduced incentives to invest in their own projects. Consequently, private investment tends to decrease as resources are diverted towards government-funded initiatives. This decrease in private investment can have implications on the overall economic growth and development.