24-open economy - A Frugal Governed OPEN Economy Lecture...

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macroS2010 Lec24-page 1 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ A Frugal Governed OPEN Economy Lecture 24-PREVIEW Dr. Jennifer P. Wissink ©2009 Jennifer P. Wissink, all rights reserved. April 21, 2010
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macroS2010 Lec24-page 2 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ Deficit Targeting as an Automatic De stabilizer
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macroS2010 Lec24-page 3 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ So What Do We Do? Good question. Listen to this. .. (quotes below all come from this story on NPR) http:// www.npr.org/templates/story/story.php?storyId=126119643 “Alarm bells are ringing over the size of the national debt, now equal to 84 percent of the country's gross national product -- the highest level since after World War II.” "The arithmetic is, unfortunately, quite clear," Bernanke said. "To avoid large and unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above. "These choices are difficult, and it always seems easier to put them off -- until the day they cannot be put off any more." “At present, tax revenues equal around 19 percent of gross domestic product and government spending around 25 percent. That gap will only widen when the bill for the baby boomers' Medicare and Social Security checks comes due.” Options: spend less » on what? tax more » tax whom?
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macroS2010 Lec24-page 4 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ International Trade All economies, regardless of their size, depend to some extent on other economies and are affected by events outside their borders. It’s an OPEN Economy! 1970s: imports roughly 7% of US GDP 2008: imports roughly 16% of US GDP » Recent years, falling some… » http://www.businessweek.com/ap/financialnews/D970FF88 The “internationalization” or “globalization” of the U.S. economy has occurred everywhere: in the private and public sectors, in input and output markets, in business firms and households.
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macroS2010 Lec24-page 5 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ Trade Surpluses & Deficits: Basics Trade Surplus: When a country exports more than it imports. Trade Deficit: When a country imports more than it exports.
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TABLE 19.1 U.S. Balance of Trade (Exports Minus Imports), 1929–2007 (Billions of Dollars) Exports Minus Imports Exports Minus Imports 1929 + 0.4 1988 – 110.4 1933 + 0.1 1989 – 88.2 1945 – 0.8 1990 – 78.0 1955 + 0.5 1991 – 27.5 1960 + 4.2 1992 – 33.2 1965 + 5.6 1993 – 65.0 1970 + 4.0 1994 – 93.6 1975 + 16.0 1995 – 91.4 1976 – 1.6 1996 – 96.2 1977 – 23.1 1997 – 101.6 1978 – 25.4 1998 – 159.9 1979 – 22.5 1999 – 260.5 1980 – 13.1 2000 – 379.5 1981 – 12.5 2001 – 367.0 1982 – 20.0 2002 – 424.4 1983 – 51.7 2003 – 499.4
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24-open economy - A Frugal Governed OPEN Economy Lecture...

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