Indicate whether the statement is true, false, or uncertain and explain why. Sup
ID: 1220834 • Letter: I
Question
Indicate whether the statement is true, false, or uncertain and explain why. Suppose the current account deficit is 5% of GDP and that half the population is borrowing constrained. Then, the government could eliminate Vie current account deficit by increasing (lump-sum) taxes by 10% of GDP. Indicate whether the statement is true, false, or uncertain and explain why. Merlotia is a two-period, small open economy that specializes in the production of Merlot wines. Merlotia is subject to a country risk premium. In period 1, the grape harvest turns out to be more plentiful than expected and promises excellent wine exports in period 2. As a result, the interest rate in Merlotia increases in period 1. In a large open economy, a shock that affects only the savings schedule can give rise to a positive comovement between savings and investment.Explanation / Answer
7.1 ) true